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

Sport Supply Grp. Del (MM) (NASDAQ:RBI)
Historical Stock Chart
From Feb 2024 to Mar 2024 Click Here for more Sport Supply Grp. Del (MM) Charts.
Sport Supply Grp. Del (MM) (NASDAQ:RBI)
Historical Stock Chart
From Mar 2023 to Mar 2024 Click Here for more Sport Supply Grp. Del (MM) Charts.