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FIGCovered Bonds

Hungarian forex swap reveals sovereign risk

A new law allowing Hungarian home owners to pay off foreign denominated mortgages in Hungarian forints at a discounted rate highlights the greater risk of sovereign intervention inherent in local banks, according to one covered bond analyst. Moody’s also took a dim view of the law, saying it could affect Timely Payment Indicators (TPI) – and perhaps ratings - of Hungary’s two covered bond issuing banks.

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