Yellow card by ECB to Hungarian c.bank over foundations, programs
Following up on the concerns raised in the ECB’s Annual Report of 2014, the ECB has continued to monitor several programmes launched by the Magyar Nemzeti Bank in 2014, which were not related to monetary policy and which could be perceived as being potentially in conflict with the monetary financing prohibition, to the extent that they could be viewed as the Magyar Nemzeti Bank taking over state tasks or otherwise conferring financial benefits on the state
, the ECB said in its annual report on Thursday."The failures to consult the ECB by Cyprus, Greece, Hungary, Ireland and Italy were considered to be clear and repetitive cases," the ECB said.
The ECB reminded that the MNB programmes included
- real estate investment purchases,
- a programme to promote financial literacy run through a network of six foundations,
- the transfer to the central bank of staff formerly employed by the Hungarian Financial Supervisory Authority, and
- a programme of purchases of Hungarian artworks and cultural properties.
“As the ECB’s concerns were not dispelled in the course of 2015, the ECB will continue to closely monitor these operations with a view to ensuring that their implementation does not result in a conflict with the prohibition of monetary financing."
The ECB also urged the MNB to ensure that “the central bank resources that it conferred on its network of foundations are not used, directly or indirectly, for state financing purposes."Monetary financing concerns in relation to the acquisition of the Budapest Stock Exchange by the MNB
In 2015 the MNB purchased majority ownership of the Budapest Stock Exchange (BSE). It paid HUF 3 550 per share or a total of HUF 13.2 bn for a 68.8% stake held by Austrian majority owners CEESEG and Österreichische Kontrollbank, boosting its ownership to 75%.The ECB said the acquisition “may be seen as giving rise to monetary financing concerns" as the central bank “effectively used central bank resources to support an economic policy goal that is typically seen as a government competence."
Prohibition of privileged access
The ECB also reminded that the MNB decided on several changes to its monetary policy instruments to support its self-financing programme.“Given the resulting incentives for banks to purchase forint-denominated government securities, some of the changes, taken together, could be seen as a means of circumventing the prohibition of privileged access under Article 124 of the Treaty," the ECB said.
Article 124 of the Treaty stipulates: “Any measure, not based on prudential considerations, establishing privileged access by Union institutions, bodies, offices or agencies, central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of Member States to financial institutions, shall be prohibited."
The ECB invites the Magyar Nemzeti Bank to carefully review these operations with a view to avoiding any conflicts with the monetary financing and privileged access prohibitions.
Failure to consult
The ECB was not consulted by the Hungarian authorities on new legal acts related to:- (i) the establishment of an extraordinary investment guarantee fund;
- (ii) personal insolvency measures; and
- (iii) the conversion of certain consumer loans denominated in foreign currency to Hungarian forints.
