The Hungarian Parliament has recently introduced new rules for portfolio transfers of loan and financial leasing receivables (“Portfolio Transfer Rules”). The new rules expand the methods for portfolio transfers, which were previously limited to assignment or case-by-case transfers. Under the Portfolio Transfer Rules all contractual rights and obligations will be transferred in their entirety - this applies to all related security agreements, insurance agreements and the like.
The Portfolio Transfer Rules will be published in the Official Gazette and will take effect 8 days after publication (sometime in the next two weeks).
Benefits of the new Portfolio Transfer Rules
Under the new Portfolio Transfer Rules:
- borrowers/security providers consent is not needed to complete the transfer, and
- all collateral (pledge, mortgage, guarantee, deposit, etc.) securing the transferred loans survives the transfer and will be enforceable by the buyer.
Precondition of the Portfolio Transfer Rules
The Portfolio Transfer Rules apply to:
- all types of loan agreements (both consumer and corporate loans);
- where the transferred portfolio contains over 20 loan agreements or has an outstanding principal amount in excess of HUF 10bn (approx. EUR 30m); and
- the buyer of the portfolio is a licensed financial service provider (it may either be a bank or a financial enterprise).
Additionally, transfers under the Portfolio Transfer Rules require the prior license of the National Bank of Hungary (“NBH”). NBH may deny the licence if it determines that the transferee cannot fulfil the transferred contractual obligations. If granted, the NBH license does not supersede other necessary licenses and approvals, therefore merger clearance may still be required.
Procedural features of the new Portfolio Transfer Rules
Sellers must notify borrowers and security providers, in writing and via post, at least 30 days prior to the date when the NBH grants the transfer license.
Borrowers and security providers have the right to opt-out and are entitled to terminate the loan agreement within the prescribed deadline by repaying the entire outstanding amounts. It is not clear, however, how the deadline for such prepayment will be determined and calculated.
Sellers may not charge borrowers/security providers costs for the transfer or pre-payment. The Banking Act has been amended to reflect the Portfolio Transfer Rules and the delivery of any information and data related to a transfer under the Portfolio Transfer Rules will be exempt from the banking secrecy provisions.