The National Bank of Hungary on Monday said it would discontinue its EUR/CHF foreign exchange swaps as demand for the liquidity provided by the facility had declined and conditions on the Swiss franc funding market had improved.
The NBH is discontinuing the swaps along with the Swiss National Bank, the European Central Bank and the Polish National Bank.
The NBH will conduct its last one-week EUR/CHF swap operation on January 25, 2010.
The facility was launched on February 2, 2009 and the amount of euros swapped for Swiss francs peaked at EUR 654m on April 14. The value of swaps fell to EUR 100m in July and the last tender with an allocated volume — of EUR 70m — was held on August 10.
A large part of the lending portfolio of Hungarian banks is in Swiss francs, as rates on these loans are much lower than for forint loans. After the start of the financial crisis, banks cut back sharply on their CHF-based lending because of the forex risk to borrowers.