Amendment to Banking Act: extended regulation on portfolio transfer

The Amendment to the Hungarian Banking Act (Act CCXXXVII of 2013.), which entered into force on the 7th of July 2015 extends regulation on the transfer of deposit and other repayable funds to the transfer of loan portfolios under fulfillment of certain conditions.

The regulation on deposit transfer has the following concept: the provisions of the Civil Code on transfers of contract shall apply with the exception that in the case of transfer the guarantees of the contract shall not cease to exist and the validity of the transfer does not require the consent of each deposit holder, because the approval of the Authority replaces them.

The Amendment allows to transfer portfolio of framework contracts on financial services between credit institutions. Furthermore it is possible to transfer portfolio of contracts on financial services between financial institutions under the following conditions: the portfolio consist of at least twenty loan or financial leasing or receivable purchase agreement, or whose value is higher than 10 billion forints.

Apart from the agreement of the transferor and the transferee financial institutions the authorization of the Central Bank of Hungary and - if applicable - the approval of the Hungarian Competition Authority are also required for the validity of the transfer.

The transferor financial institution is obliged to notify each affected person (including borrowers and security providers) on the transfer and draw their attention on the modified terms of the contract. The unilateral modification of the contract cannot be disadvantageous with regard to the interest rate, fees and costs. The client shall have the right to terminate the contract, however upon termination all duties of the client become due and shall be paid back until the last day of the termination period.

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