The Budapest Court of Appeals rejected an appeal by Hungary’s OTP Real Estate Leasing to dismiss government accusations that their foreign currency denominated mortgage loans were “unethical.” A branch of a Hungary’s largest bank active in a number of central and southern European countries, OTP sued the government in September 2014 after parliament passed a “Debt Relief Act” declaring all FX loans to be “unethical” and therefore invalid unless proven otherwise in a court of law.
According to the second level verdict. the earlier ruling did not clearly establish whether the bank’s lending practices were unlawful or simply unethical, and amended the first level decision in favor of the latter, citing the lack of appropriate legal regulations.
OTP sued the state after parliament passed a FX loan relief act, according to which all FX based mortgage loans were “unethical” and therefore invalid. OTP was but one of a dozen or so commercial banks that brought suit, arguing that the loans were neither unlawful nor unethical and, for this reason, valid. The suit brought by OTP alleged that the law amounted to retroactive legislation. The Budapest Court of Tribunals acquitted the state on first grade during the autumn.
During the initiation of legal procedures, governing Fidesz deputy caucus leader Gergely Gulyás assured the public that the provisions of the Debt Relief Act were “completely in line with European Central Bank regulations.”
OTP CEO Sándor Csányi declared in August, that if the bank loses the case i Hungary, it is prepared to to take it to the European Court in Strasbourg. In Csányi’s opinion the banks were both “ethical and fair in their conduct” which he intends to establish using every legal instrument available.s
The world financial crisis resulted in tens of thousands of Hungarian households to default on euro and Swiss franc loans after monthly debt service nearly doubled following the strengthening of those two currents against the forint.
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