Hungarian banks renew call for tax easing as instant payment launch nears

BUDAPEST (Reuters) - Hungarian banks say they have spent up to $133 million on a new instant-payments system and won't pass on the cost to customers, but are seeking to recoup part of it by asking the government to ease a financial transaction tax.

Under the new system, due to launch on March 2 after several months of delays, domestic bank transfers worth up to 10 million forints ($33,050) will be settled within five seconds, seven days a week, as the banks respond to increased competition from fintech providers.

Andras Becsei, chairman of the Hungarian Banking Association, said the project - at a total cost of 30-40 billion forints - was the biggest investment the lenders had ever made.

"To make instant payments a success, it is important for local lenders not to be at a competitive disadvantage to foreign service providers," he said, reiterating the banks' call for a tax on financial transactions to be repealed.

Levente Kovacs, secretary general of the association, said banks had struck a gentlemen's agreement with the central bank that customers would not face increased charges to cover the cost of the new system.

But the association - including OTP Bank <OTPB.BU> and foreign players such as Austria's Raiffeisen <RBIV.VI>, Belgium's KBC Groep <KBC.BR> and Italy's UniCredit <CRDI.MI> - said the government should reduce the annual tax by 10 billion forints ($33 million) to take account of their extra costs.

The financial transaction tax is expected to raise 226 billion forints this year. The finance ministry did not immediately reply to a Reuters request for comment.

The association said the sector's net profit rose by 10% to 560 billion forints in the first nine months of 2019 as lending expanded by 20%.

(Reporting by Gergely Szakacs; Editing by Katya Golubkova and Mark Trevelyan)