Hungarian banks obliged to encourage their customers to buy government securities
At the beginning of June, several pieces of financial legislation were published in the Hungarian Official Gazette, most of which were aimed at the government's efforts to channel the public and the financial sector into government securities. One of the regulations published at the time required banks to show customers how much they would have gained if they had put their money in government securities as opposed to bank deposits.
Government Decree 209/2023 stipulated that, "in order to improve financial awareness,"
credit institutions established in Hungary must send an awareness-raising notice to natural persons with a bank account contract with them once between 1 October 2023 and 31 December 2023.
In this information notice, the credit institution must show, in a clear tabular form, the return achieved in the specified reference period by a person who bought or subscribed for and continuously held government securities issued by the Hungarian State, which can be purchased by private individuals, for HUF 100,000, HUF 500,000 and HUF 1.000,000.
In addition, financial institutions will have to calculate the interest rate that the average annualised interest rate on HUF deposits held by households would have yielded.
Further details of the government regulation concerned were published today. Among others, the content of the letter that financial institutions will have to send to customers:
"Dear Customer,
In the current inflationary environment, it is important that families' savings retain their value. To this end, the Hungarian government has decided that banks should inform their customers about the investment opportunities in government securities for households.
You have a current account contract with our bank [name of institution]. Current accounts are usually used by customers for payment services. However, such accounts can accumulate unspent funds that can become savings in the longer term.
We would like to draw your attention to the fact that if you invest your savings in government securities, you can achieve a significant return."
The letter also contains a table comparing the Treasury Savings Certificate and the 12-month discount Treasury bill with the Bonus Hungarian Government Security (BMÁP) in terms of annual interest income calculated on the basis of different amounts. It concludes as follows:
"Please note that the above information is not exhaustive and does not constitute an offer. For any investment, it is of crucial importance to be fully aware of the information and opportunities that underpin it. You can obtain detailed information from our Bank on investment opportunities in government securities. For detailed information on current opportunities to buy government securities, please visit https://www.allamkincstar.gov.hu. We would like to draw your attention to the fact that you can also purchase government securities directly from the Hungarian State Treasury at https://webkincstar.allamkincstar.gov.hu."
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