Budapest blues

WHEN AN OBSCURE Budapest newspaper reported in mid-­October that three “not small” foreign-owned banks were ­considering pulling out of Hungary, it prompted a surprisingly vigorous response. Head offices from Brussels to Turin hurried out press statements in which the words “commitment”, “strategic” and “long-term” featured heavily. A couple even found time to call Euromoney and ask for interviews with senior management to be pulled, so sensitive had the issue become.

The problem was that the story, although unsubstantiated, was all too believable. Hungary’s banks have had a torrid two years – non-performing loans climbed relentlessly to reach 8.5% at the end of June as large portfolios of Swiss franc- and euro-denominated mortgages sank ever further underwater while at the same time new business failed to materialize because of stagnant domestic demand. Worse still, the new Fidesz government, elected in...