By Margit Feher
BUDAPEST--Hungarian parliament passed tailor-made legislation
Tuesday that increases indemnity payments to clients of bankrupt
brokerage Quaestor, despite objections from banks which will be hit
by the extra payment.
The legislation was required because "it would incur extreme
hardship to the courts should the large number of clients pursue
their claims individually," the law reads.
Quaestor clients will each be entitled to up to 30 million
forints ($108,111) in compensation by the legislation, an increase
from the previous HUF6 million maximum limit. The new amount would
cover nearly all of the 32,000 clients' losses, Prime Minister
Viktor Orban has said.
Hungary's investment protection fund BeVa will cover the
indemnity payments from the proceeds it collects from its
members--banks providing investment services, brokerages and
investment fund management companies. Banks supply the lion's share
of the compensation contributions.
The Banking Association, which represents Hungary's banks and
has been in negotiations with the government on the move, has
objected to the increase.
"We cannot see the professional reasons for increasing indemnity
five-fold," Levente Kovacs, head of the association, said in a
statement.
The Banking Association estimates indemnity payments will total
about HUF177 billion, Mr. Kovacs said on Info radio.
This equals 0.6% of gross domestic product, Wall Street Journal
calculations show, and sharply exceeds the HUF60 billion which the
Hungarian government has pledged to lower its special, bank-sector
tax next year.
Based on their membership in Hungary's investment protection
fund BeVa, the banks hit by the new law include Hungary's largest
lender OTP Bank Nyrt. (OTP.BU), K&H Bank Nyrt., owned by KBC
Group NV (KBC.BT) of Belgium, the local arms of Austria-based banks
Erste Bank AG (EBS.VI) and Raiffeisen International AG (RBI.VI)
UniCredit SpA (UCG.MI) and Intesa Sanpaolo SpA (ISP.MI) of
Italy.
Locally-owned brokerage Quaestor became bankrupt in March when
it defaulted on its corporate bonds issued without permit.
Write to Margit Feher at margit.feher@wsj.com; Twitter:
@margitfeher