* C.bank worried about new problems from FX loans in future
* Wants to set harsher terms than for forint loans
* Seeks power to ban products that undermine stability
By Toni Vorobyova
ISTANBUL, Oct 4 (Reuters) - Hungary's central bank has asked the government for extra powers to discourage Hungarians from taking on foreign currency loans in order to lessen the economic impact of future crises, governor Andras Simor said on Sunday. Hungary has been harder hit by the global crisis than some of its neighbours, forcing it to resort to a $25.1 billion IMF-led rescue package last year to avoid meltdown.
Hungary was particularly exposed because many companies and consumers had taken out foreign currency loans, which accounted for as much as 90 percent of private debt before the crisis thanks to the lower interest rates offered for borrowing in euros or Swiss francs.
"I consider foreign currency debt exposure as a bubble, as a threat to financial stability, as a systemic risk," Simor told a seminar at the IMF/World Bank meeting in Istanbul.
"It is very important to put in place regulatory limits that
would disable such a build up of foreign exchange debt again ...
so we are proposing certain major legislative changes."
The central bank has already called on banks to reduce such
lending voluntarily, but Hungary's biggest bank OTP
Simor said the central bank wanted to be able to suspend activities or products which it felt were endangering stability, as well as to propose legislation and actions to the government if it sees risks building up in the economy.
"To these proposals, they will then either have to do what is proposed or explain if they don't want to follow our recommendation," he said, without specifying how the government had responded to the proposals.
The central bank also wants to make the foreign currency loans less attractive to consumers, by introducing stricter limits on loan-to-value and payment-to-income ratios than for forint-denominated borrowing.
"The result of that will be that while the customer sees the lower interest rates in foreign exchange, he also sees transparently in the terms of the loan the higher risk that he is taking by borrowing in foreign exchange," Simor said.
(Editing by Ruth Pitchford)