Payment moratorium in Hungary

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To mitigate the impact of the coronavirus pandemic on the national economy, the Hungarian government has, among other measures, introduced a payment moratorium as of March 19, 2020, until December 31, 2020, by way of Government Decree 47/2020. (III. 18.) (Decree).

Questions and answers

What does the moratorium mean?
It is a payment holiday for principal, interest and fees under credit facilities, loans and financial leasing provided in a business-like manner. Any contracts maturing during the state of danger are prolonged until December 31, 2020. The moratorium also amends accessory and non-accessory secondary obligations (e.g. security interest, guarantee).

The payment holiday applies to loans already drawn under contracts existing at midnight on March 18, 2020.

Debtors continue to have the right (but not the obligation) to make payments under the original terms.

The parties can contractually agree not to apply the moratorium to their contract.

How long does the moratorium last?

It is not yet clear. The Decree suggests that the moratorium lasts until December 31, 2020. However, it also mentions that the moratorium stands during the state of danger. The moratorium can also be prolonged further by the decree of the government. Currently, the state of danger ends on March 26, 2020; however, everyone expects the prolongation of the state of danger to be authorized by the Parliament soon. Based on the authorization from the Parliament, as of March 31, 2020, the government has indefinitely prolonged the Decree and the Second Decree (as defined below) until the end of the state of danger.

Who are the subjects of the moratorium? Are there any exemptions?

All debtors (private persons and legal entities) in Hungary.

The Hungarian state, local governments and enterprises subject to the legislations listed in section 39 of Act CXXXIX of 2013 on the National Bank of Hungary (e.g. financial institutions, insurance companies the Hungarian Development Bank and the Hungarian Export Import Bank) do not qualify as debtors for the purposes of the moratorium. The Second Decree (as defined below) extends the definition of debtor to financial enterprises and investment funds as well.

What payment obligations are affected by the moratorium?

Credit facilities, loans and financial leasing provided in a business-like manner (i.e. as part of a financial service business activity). Therefore, in our view, the moratorium does not apply to bonds, hedging transactions etc. The Second Decree (as defined below) extends the moratorium to employer’s loans.

When does the obligation suspended under the moratorium become due and payable?

In our view, unless agreed otherwise by the parties, the suspended obligation, in particular, accrued and otherwise due and payable interests and fees, becomes due and payable immediately after December 31, 2020, (or whenever the state of danger is lifted). However, the Decree provides that the deadlines for performing the contractual obligations as well as the duration of the obligations shall be prolonged by the moratorium. This could also be interpreted as an extension to the tenor of the contract (and its principal repayment schedule, if applicable) with the duration of the moratorium after the moratorium ends. This aspect will require further assessment and consultations with the National Bank of Hungary and could result in a need to amend all existing contracts to ascertain the post-moratorium terms of the contracts. We expect further legislative actions to avoid the need for the individual modifications of contracts.

The frequently asked questions relating to the payment moratorium and supervisory measures in relation to the pandemic published by the National Bank of Hungary on April 30, 2020, (the FAQs)1 state that a bullet repayment that would have become payable during the moratorium shall only be due following the expiry of the moratorium plus the number of days between the starting date of the moratorium and the original maturity date of the loan.

The Second Decree (as defined below) provides that interest and fees accrued during the moratorium shall be payable together with the repayment instalments becoming due in the remaining tenor in annually equal instalments after the moratorium. After the expiry of the moratorium, the tenor shall be extended in a way that the amount of the repayment instalments becoming due and the amount of interest payable in instalments accrued during the moratorium together shall not exceed the amount of the repayment instalments under the original agreement. The Second Decree does not specify if a “repayment instalment” refers to the principal only or it also includes interest (and fees). As the Second Decree also refers to “amount of interest payable in instalments accrued during the moratorium,” we cannot exclude an interpretation that “repayment instalment” also includes interest. It seems that the language is similar to that used regarding earlier legislations on retail mortgage loans, so it tends to consider the matter from an annuity method point of view. The Second Decree still does not specify how balloon principal payments (with no scheduled repayment instalments) and accrued interest should be repaid and paid after the moratorium.

Do interest and fees accrue during the moratorium?

Yes. There is no waiver on any of those provided in the Decree. We believe that interest calculations and notices on accrued interest shall be shared with the debtors subject to the applicable contractual arrangement.

Do interest and fees capitalize during the moratorium?

No. There is no indication of this in the Decree. The Second Decree (as defined below) expressly prohibits this either during the moratorium or thereafter.

Will default interest be payable on the suspended obligations?

In our view, default interest shall not apply to obligations which are subject to the moratorium unless the parties disapplied the moratorium.

Should we expect further legislations on the topic?

Certainly, the Decree itself envisages detailed rules to follow.

The first detailed rules have been introduced by Government Decree 62/2020 (III. 24.) with effect of March 25, 2020, (Second Decree) which is attached as Annex 2. Most importantly, it states that voluntary performance of the obligations based on the original terms does not affect the moratorium and the performance has to be accounted for in accordance with the original terms of the contract. In our view, this means that even if the debtor has made payments voluntarily during the moratorium, it can continue to rely on the moratorium in respect of any other obligations (i.e. voluntary payments per se do not contract the debtor out of the moratorium).

Has any subsequent legislation been introduced?

While we cannot speak about a general moratorium on enforcement of rights and remedies of creditors, Government Decree 57/2020 (III. 23.) has introduced certain temporary restrictions on court execution proceedings and the possible actions of bailiffs with effect from March 24, 2020. We suggest seeking legal advice if such proceedings are ongoing or are planned in Hungary.

A further legislation has been introduced by the Government Decree 145/2020. (IV. 22.) with effect from April 25. 2020. The obligations of entities and organizations subject to the legislations listed in section 39 of Act CXXXIX of 2013 on the National Bank of Hungary (e.g. financial institutions, insurance companies, investment funds, the Hungarian Development Bank and the Hungarian Export Import Bank) among others, vis-à-vis their clients to supply information or make declarations which become due during the state of danger shall be prolonged by 30 days. Furthermore, in relation to contracts concluded by such entities and organizations, if the performance by the clients of their obligation to make any declaration, deliver any document, rescind or make any notification was not possible during the state of danger due to the state of danger, then such obligation, if performed within 30 days after the end of the state of danger, shall qualify as performed within the applicable deadline.

Like the situation, this is a work-in-progress document. This is for information purpose only and expresses our current views on the matter. This is not a piece of legal advice and no reliance on this note is accepted. Review date May 12, 2020.

Annex 1 – Extract of the Government Decree 47/2020 (III. 18.) - on the immediate measures needed to mitigate the impact of the coronavirus pandemic on the national economy

In order to mitigate the impact of the coronavirus pandemic on the national economy and on the citizens in state of danger ordered by Government Decree 40/2020. (III. 11.) on the declaration of state of danger, the government, acting within the scope of its original legislative power set out in Article 53(2) of the Fundamental Law of Hungary and within its competence set out in Article 15(1) of the Fundamental Law of Hungary, orders the following:

Section 1

  1. Unless otherwise agreed by the parties, during the state of danger, the debtor's obligation to pay any principal, interest and fees under a credit, or loan agreement or a financial leasing agreement provided in a business-like manner (hereinafter referred to as the agreement) shall be amended so that a moratorium shall be granted to the debtor in respect of its obligations to pay any principal, interest and fees (hereinafter referred to as the payment moratorium). The payment moratorium shall not affect the debtor's right to perform under the original terms of the agreement.
  2. The amendment of the performance deadline of the agreements also amends the accessory and non-accessory secondary obligations securing the agreement, regardless of whether the secondary obligation is included by the parties in an agreement or in a unilateral declaration.
  3. The payment moratorium shall last until December 31, 2020, and may be prolonged by a government decree.
  4. The performance deadline of the contractual obligations as well as the duration of the obligations shall be prolonged by the duration of the payment moratorium. The tenor of the agreement which expires during the state of danger shall be extended until December 31, 2020.
  5. The provisions of this Section shall apply to loans already disbursed on the basis of agreements existing at 12:00 pm on March 18, 2020.

Section 2

For consumer credits not secured by pledges disbursed under any agreement concluded after the entry into force of this decree, the annual percentage rate shall not exceed the central bank base rate plus five percentage points.

Section 7

Further details regarding the provisions under Sections 1 to 6 shall be set out in government decrees.

Section 8

For the purposes of this decree the state, the local government and the enterprises subject to the legislation defined in section 39 of Act CXXXIX of 2013 on the National Bank of Hungary shall not qualify as debtors2.

Section 9

This Decree shall enter into force on the day following its publication.

Annex 2 – the Decree Decree 62/2020 (III. 24.) - on the detailed rules of the payment moratorium introduced by Government Decree 47/2020 (III. 18.), on the immediate measures needed to mitigate the impact of the coronavirus pandemic on the national economy

The government, acting within the scope of its original legislative power set out in Article 53(2) of the Fundamental Law of Hungary and within its competence set out in Article 15(1) of the Fundamental Law of Hungary, orders the following:

Section 1

  1. The debtor's performance under the original contractual terms shall not affect the scope and effect of the payment moratorium under Section 1(1) of the Government Decree 47/2020 (III. 18.) on the immediate measures needed to mitigate the impact of the coronavirus pandemic on the national economy (hereinafter referred to as the Decree).
  2. In the case of performance under Section 1(1) of the Decree, such performance shall be credited in accordance with the provisions of the agreement in force prior to the imposition of the moratorium.
  3. Section 1(1) of the Decree shall also apply mutatis mutandis to employer's loans.
  4. In deviation from Section 8 of the Decree, financial enterprises under Act CCXXXVII of 2013 on Credit Institutions and Financial Enterprises and investment funds under Act XVI of 2014 on Collective Investment Trusts and Their Managers, and on the Amendment of Financial Regulations shall also be considered debtors within the meaning of Section 1 of the Decree.
  5. Section 1(2) of the Decree shall also apply mutatis mutandis to guarantee agreements and guarantee undertakings.

Section 2

  1. The principal debt shall not be increased by the amount of interest unpaid during the payment moratorium, neither during the payment moratorium, nor after the payment moratorium has expired.
  2. The interest accrued during the term of the payment moratorium shall be payable together with any repayment instalments becoming due in the remaining tenor in annually equal instalments in the tenor after the expiry of the payment moratorium.
  3. After the expiry of the payment moratorium, the tenor shall be extended in a way that the amount of the repayment instalments becoming due and the amount of interest payable in instalments accrued during the moratorium together shall not exceed the amount of the repayment instalments under the original agreement.
  4. Provisions applicable to interest shall also apply mutatis mutandis to fees.

Section 3

The surety fee payable on the basis of a loan granted under Government Decree 44/2019 (III. 12) on baby-expecting support shall be excused for the duration of the payment moratorium under Section 1(1) of the Decree.

Section 4

  1. Provisions of Section 2 of the Decree shall be applicable until December 31, 2020, to agreements concluded after the entry into force of the Decree. Unless this time limit is extended in respect of the annual percentage rate, following such date, the annual percentage rate specified in the announcement published by relevant lender at the time of the conclusion of the agreement be applicable.
  2. For the purposes of Section 2 of the Decree, the central bank base rate effective on the first day of the relevant calendar half-year shall be applicable for the entire duration of the relevant calendar half-year.

Section 5

The agreement as amended in accordance with Section 1 of the Decree, is not required to be incorporated into a notarial deed, the former notarial deed is valid within the scope of the amended content of the agreement.

Section 6

  1. The payment moratorium under Section 1(1) of the Decree shall also apply mutatis mutandis to the purchase price instalment and rental fee payment obligations of natural persons participating in the National Asset Management Program.
  2. The National Asset Management Private Limited Company shall not exercise the right of termination for reason of non-payment of the rent until December 31, 2020.

Section 7

  1. For the purpose of Section 1(1) of the Decree, the debtor who is subject to the procedures specified in Act CV of 2015 on debt settlement of natural persons as well as persons who are liable for such debtor’s debt repayment obligations shall qualify as debtors.
  2. The grace period for payments under paragraph (1) shall apply to the payment of the minimum amount of the repayment instalment to the principal creditor, and to the settlement of payment obligations arising from debt relations listed under Section 1(1) of the Decree that have been or are set out in an out-of-court debt settlement agreement, a court debt settlement agreement and a court debt settlement order, in respect of the instalments due after the entry into force of the Decree.

Section 8

This Decree shall enter into force on the day following its publication.


1The FAQs are available here
2"(1) Unless otherwise provided for by law, the National Bank of Hungary (the NHB) shall, within the framework of his responsibilities (…), supervise the bodies and persons, and the activities covered by:
a) the Act on Voluntary Mutual Insurance Funds;
b) the Act on the Hungarian Export-Import Bank Corporation and the Hungarian Export Credit Insurance Corporation;
c) the Act on Credit Institutions and Financial Enterprises;
d) the Act on Home Savings and Loan Associations;
e) the Act on Mortgage Loan Companies and Mortgage Bonds;
f) the Act on Private Pensions and Private Pension Funds;
g) the Act on the Hungarian Development Bank Limited Company;
h) the CMA;
i) the Act on Insurance Institutions and the Insurance Business;
j) the Act on the Distance Marketing of Consumer Financial Services;
k) the Act on Occupational Retirement Pension and Institutions for Occupational Retirement Provision;
l) the IRA;
m) the Act on Collective Investment Trusts and Their Managers, and on the Amendment of Financial Regulations;
n) the Act on Reinsurance;
o) the Act on the Pursuit of the Business of Payment Services; and
p) the Act on Insurance Against Civil Liability in Respect of the Use of Motor Vehicles;
q) the Act on the Central Credit Information System;
r) the Act on Settlement Finality in Payment and Securities Settlement Systems;
s) the Act on Payment Service Providers.
(2) The NHB shall, within the framework of his responsibilities (…), have powers to oversee the activities of lenders offering commercial loans, in respect of the activities covered by the Act on Consumer Credit.
(3) The NHB shall, within the framework of his responsibilities (…), exercise the supervisory functions defined in Act LIII of 2017 on the Prevention and Combating of Money Laundering and Terrorist Financing as regards the service providers specified in Paragraphs a)-e) and m) of Subsection (1) of Section 1, as well as the supervisory tasks provided for in Act LII of 2017 on the Implementation of Restrictive Measures Imposed by the European Union and the UN Security Council Relating to Liquid Assets and Other Financial Interests".