Banks Cry Foul at New Hungary Debt Relief Plan

Hungarian lawmakers approved Friday a set of radical measures to ease household mortgage debt despite criticism from banks, which expect to foot a bill of several billion euros.

The changes are the latest attempt by Prime Minister Viktor Orban's government to help around a million Hungarians whose repayment rates on foreign currency mortgages rocketed after the 2008-09 financial crisis.

The new changes oblige banks to keep the exchange rate at the same level as when the mortgage was taken out and prohibit hiking interest rates on the loans. More measures are expected later this year.

Banks, many of them foreign-owned which have already lost money from similar schemes in the past, have cried foul, warning that EU member Hungary's reputation among foreign investors would suffer.

Earlier this week the Hungarian currency, the forint, fell to a new three-month low against the euro because of the controversy.

On Thursday, Austria's Erste Bank said it expected to post a loss of up to 1.6 billion euros ($2.2 billion) this year, in large part due to the changes affecting its Hungary business.