BUDAPEST: Hungary's central bank plans to impose stricter rules on household loans to prevent an excessive unhealthy growth in credit and proposes regulatory action to encourage banks to clean bad loans from their books, the bank said on Thursday.
In its latest financial stability report, the National Bank of Hungary said its Financial Stability Council has approved a plan to impose an upper limit on payment-to-income ratios on household loans, which should take effect already in 2014.
The bank also said that the prolonged existence of a high stock of non-performing loans could pose a risk to financial stability, and this required an acceleration of cleaning of loan books with possible "positive and negative incentives".
"For banks, a negative incentive would be the introduction of stricter loan loss provisioning obligations," it said in the stability report.
The bank added that the concept of a "bad bank" could also be considered as an option but these were only proposals at this stage.
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