EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 2 December 2008 
at the request of the Hungarian Ministry of Finance  
on a draft law amending the Law on the Magyar Nemzeti Bank 
(CON/2008/83)  
 
Introduction and legal basis  
On 23 October 2008 the European Central Bank (ECB) received a request from the Hungarian Ministry 
of Finance for an opinion on a draft law (hereinafter the ‘draft law’) amending Law LVIII of 2001 on the 
Magyar Nemzeti Bank1 (hereinafter the ‘Law on the MNB’). 
The ECB’s competence to deliver an  opinion is based on Article 105(4) of the Treaty establishing the 
European Community and the second, third, fourth, a nd fifth indents of Article 2(1) of Council Decision 
98/415/EC of 29 June 1998 on the consultation of  the European Central Bank by national authorities 
regarding draft legislative provisions2, as the draft law relates to banknotes and coins, the Magyar 
Nemzeti Bank (MNB), data collection for the centr al bank information system and to payment and 
settlement systems. In accordance with  the first sentence of Article 17.5 of the Rules of Procedure of the 
European Central Bank, the Governing Council has adopted this opinion. 
 
1. Purpose of the draft law 
The draft law has the following main objectives: 
(a) to align the MNB’s legal framework with the Treaty provisions on central bank independence,  
(b) to regulate the date of taking up of offi ce by Monetary Council Members and their oath, 
(c) to change the current prope rty acquisition restrictions,  
(d) to provide detailed rules on conflicts of inte rest applicable to MNB officials and employees, 
(e) to authorise: (i) the MNB’s Governor to regulate certain issues concerning central depository 
activities and central counterparty activities; (ii) the MNB to collect statistical data in anonymous 
form from other bodies belonging to the official statistical reporting service; (iii) the MNB to 
involve third parties, i.e. the Post Office and credit institutions, in fulfilling its obligations related to 
exchanging mutilated or withdrawn banknotes and coins for legal tender; (iv) the forwarding of any 
                                                      
1  Magyar Közlöny.2001. VII. 5. 
2 OJ L 189, 3.7.1998, p. 42. 
counterfeit Hungarian and foreign currency  to the designated bod y through the financial 
intermediary  system  and the postal service. 
 
2. General observations 
2.1 The ECB repeats its previous comments regard ing the frequent amend ments to the Law on the  
MNB. One c onsideration in the context of central  bank independen ce is the need for a central bank 
legal fram ework that provi des a stable and lo ng-te rm basis for the central bank’s functioning. With 
regard to the  MNB, the  ECB notes t hat the La w on the MN B has  been amended on several 
occasions in recent y ears, often substantially  chan ging the MNB’ s legal fra mework, and finds that 
the intro duction of differ ent legal co ncepts w ithin such a relatively short tim e has ad versely  
affected the MNB’s organisa tional and governance stabilit y3. 
2.2 The ECB finds it regrettable that the dra ft law still does not address all the issues highlighted in the  
ECB’s Conve rgence Report of Ma y 2008. 
 
3. Specific obse rvations 
Issues regarding the pro hibition on mo netary financin g 
3.1 The ECB wel comes Articl e 4 of the draft law, which  inserts an ex press ref erence to Articl e 101 of  
the Treaty  into Article 1 6(1) of the Law on th e MNB, along with the reference to Council  
Regulation (EC) No 3603/93 of 13 Decem ber 1993 speci fying definitions for the application of the  
prohibit ions r eferred to in Articles 104 and 10 4b (1) of the Treaty4, as suggested in the ECB’s  
Convergence Report of May  2008. C oncerning Artic le 14 and Article 71(3) of the Law on the  
MNB, the Convergence Report also suggests inserti ng an express reference to Article 101 of the  
Treaty . Articles 1 and 16 of the draft la w insert a  reference to Article 16(1) of the Law on the MNB  
which refers to Article 101 of the Treaty . The ECB considers this serial reference merely  a question  
of legislative technique and fin ds that  the result o f referring to Article 10 1 of t he Treaty  is 
achieved.  
3.2 The ECB notes that while  the draft la w amends Article 14 and Article 71(3) of the Law on the  
MNB, it doe s not specify  that loans are extended against adequate collateral. The ECB considers  
that such a specification would be necessary , since it would introduce an additional safeguard 
which should m inimise the possibilit y of the MNB suffering any  loss. 
3.3 Article 3 of t he draft law, by amending Article 15(1) of the Law on the MNB, extends considerabl y 
the list of public sector accounts to be managed by  the MNB. It  also  introduces a new Arti cle 1 5(2) 
to the effect that the MNB must pay  interest e qual to the central bank base  rate on the current 
balance of the single bank account of the Hungari an State Treasury  account w ith the MNB. As 
addressed in the ECB’ s Convergence Report of Ma y 2008, national legislati on on the fiscal agent 
                                                      
3  ECB Opinion  CON/2007/14 of 24 May  2007  at the requ est of the Hungarian Ministr y of Finance on  a dr aft law  
amending th e Law on the Mag yar Nemzeti Bank . 
4  OJ L 332, 31.12 .1993, p . 1.
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function,  whi ch national c entral banks (NCBs) ar e enabled to co nduct u nder Article 21.2 of the 
Statute of the European System of Central Banks and of the European Central Bank (hereinafter the 
‘ESCB Statute’), shoul d be co mpatible with the monetary  financi ng prohibition in Article 101 of  
the Treaty . Compliance with the monetary  fina ncing prohi bition is affected where national  
legislation enables the remuneration of deposits or current account balances abo ve, rather than at or  
below, m arket rates. In the present cas e, if the central bank base rate is above market rate s, the 
remuneration margin is ab ove market rates and cons titutes a de facto intra-y ear credit, contrary  to 
the objective of the prohi bition o n monetary  financ ing, and m ight underm ine the prohibiti on’s 
objectives. The ECB suggests r eplacing in Article  3 of the draft law, amending Article 15(2) of the 
Law on the MNB, the words ‘equal to the central ba nk base rate’  with ‘below or at market ra tes’. 
Banknotes an d coins 
3.4 According to Article 8 of t he draft law, amending Article 31(9) of the Law on t he MNB, the MNB 
may not pa y compensation for the valu e of banknot es or coins which have been destroyed. The 
ECB considers that if the destroy ed banknotes or co ins are legal tender, th ey should be redeem ed, 
even for a  fee, unless  there i s a susp icion that the destruction is intentional or results from a 
criminal act. 
3.5 Referring to Article 9 of the draft law, amending Article 31/A(2) to (4) of the Law on the M NB, the 
ECB notes that the expert exam ination shoul d not be prevented b y the use or retention of  
counterfeit banknotes as evidence i n criminal proceedings, except when  such evidence is  
impossible, taking i nto account t he qua ntity and t ype of seized counterfeits5. 
3.6 Article 9 of t he draft law amending Arti cle 31/A(2) t o (4) of the L aw on the M NB lists the service 
providers obl iged to ensure that euro b anknotes a nd coins that th ey have recei ved and intend t o 
return to circulation are checked for auth enticity. The ECB reco mmends also taking into 
consideration future am endments to Council Re gulation (EC) No 133 8/2001 of 28 Ju ne 2001  
laying down measures necessary  for the prot ection of  the euro against counterfeiting6. 
Central bank independence - the Governor’s oath 
3.7 According to Article 10 of the draft law am ending Article 49(7) of the Law on th e MNB, Monetary 
Council m embers must make an oath or a sole mn promise and sign a docum ent before the 
Hungarian Pr esident with the words re quired by  Law XXVII of 2008 on the  oath and solemn  
prom ise of certain public  officials7. Since the Mon etary Cou ncil mem bers are involved  in the 
performance  of ESCB-rel ated tasks,  the wording of  the oath to be sworn by them  needs to be 
adapted to com ply with Article 14.3 of t he ESCB Statute. 
                                                      
5  Recommendatio n ECB/2006/13 of 6 Octobe r 2006 on the adoption of certain measur es to protect euro banknotes more  
effectively  again st counterfeiting (OJ C 257,  25.10.2006, p. 16). 
6  OJ L 181, 4.7 .2001, p . 6.
7  Magyar Közlöny 2008. VI. 18. The wording of t he oath is the following: ‘I, ….( name of the designated public officer ), 
hereb y make an oath to be faithf ul to m y hom e countr y, to the R epubli c of Hung ary and to i ts people, I will com ply and 
ensure com pliance with the Constitut ion, together with other laws, I will keep an y secrets disclosed  to m e, I will fulfil m y 
duties arising fr om my position as a … ( name of the position ) in order to promote the dev elopment of the Republic o f 
Hungar y and the appl ication  of th e Constitu tion’ .  
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Statistics 
3.8 The ECB welco mes Articles 6 and 19 of the dr aft law amending Article 28 of the Law on the MNB 
and Law XLVI of 1993 o n statistics8. The ECB finds that the proposed  amendments are in line with 
Community  legislation. 
Recognition of MNB’s oversight functio ns 
3.9 The ECB welco mes the in tention of the  draft law to specify  that the MNB’ s oversight activity  is 
one of its core functions in respect of pay ment systems, securities clearing and s ettlement sy stems 
and central counterparties. The ECB considers that  an im portant element of the draft law is the 
express speci fication of the MNB’ s oversight power s which lay s down a good basis for defining 
the legal framework of a central bank’s oversight  function. T he draft law also provides f or an 
effective oversight tool by authorising t he MNB’s Governor to regulate certain issues with r egard 
to securities clearing and settlem ent infrastructures, including centr al counterparties. 
3.10 As noted in previous ECB opinions, an oversight  function is in herent in the central bank task of 
prom oting a sound m arket infrastructure, in order to  safeguard the effectiveness of monetary  policy 
and the overall stabilit y of the fi nancial sy stem9. It shoul d be recognised in this context that 
payment sy stems and securit y settlement sy stem s (SSS) are interlinked given the use of the  
mechanism o f ‘delivery  versus pay ment’ under which settlemen ts of securities and transfers of 
funds take pl ace si multaneousl y. There is therefore a strong argument for inte grating t he oversight  
of pa yment and securities settlement sy stems and fo r the NCB to perform this f unction. Settlem ent 
of both legs o f such transactions shoul d be subject  to sim ilar safeg uards to avoi d asy mmetries with 
system ic implications. The role of NCBs in SSS ove rsight is evi dent gi ven SSS ’ crucial role i n the 
functionin g of the financial markets and the need for the m to be safe and effi cient. Oversi ght of 
payment and clearing sy stems is one of the core co mpetencies attri buted to the Euros ystem, with its  
legal basis specified in Article 105(2) of the Treaty and Article 3.1 and Artic le 22 of t he ESCB 
Statute10. In particular, the Euros ystem  NCBs perform oversight of pa yment sy stem s in line wit h 
the co mmon oversight pol icy defined by the ECB’ s Governing C ouncil, which will also appl y to 
the MNB once Hungary  adopts the euro11. As noted in previous E CB opinions12, the central b ank 
oversight role  is also reflected: (i) at internati onal level, in the joi nt work on SSS concluded by the  
Committee o n Pay ment and Settlem ent System s (CPSS) and the International Organizati on of  
                                                      
8  Magyar Közlöny.1993. V. 12. 
9  Paragraph 2.8 of  ECB Opinion C ON/2006/53 of 16 November 20 06 at the request of the Polish Minister of Finance on a 
draft law amending th e Law on trading  in financial instru ments; see p aragraph 3.2 of  ECB Opinion CON/2006/20 o f 
25 April 2006 o n the Dutch dr aft law con cerning financial se ctor supervision an d paragraphs 4 to 14 of ECB Opinion  
CON/1999/19 of 20 Januar y 2000 at the request of the Luxem bourg Ministr y for the Treasur y and the Budget on a draft 
legislative  proposa l imple menting Dire ctive 98/26/E C [ti tle shorte ned]; se e CPSS,  ‘Central ba nk ove rsight of pay ment 
and settlement s ystems’, May  2005, paragraph  1.1; publication  available on the BI S website at www.bis.org. 
10  See par agraph 5  of ECB Opinion  CON/2003/14 of 7 August 2003 at the request of  the Ban ca d’Italia on a draf t regulation  
on pa yment systems, payment infrastructur es and payment instruments. 
11  See par agraph 1 4 of ECB Opinion CON/2005/24 of 15 July  2005 at the request of the Min istry of Finance of th e Czech  
Republic  on a draft law on  the integra tion of finan cial market superv isors; see also p aragraph 4.2 of  ECB  Opinion 
CON/2006/15 of 9 March 2006 at the r equest of the Polish Mini ster of Finan ce on a draft law on the supervis ion of 
financial institutions. 
12  See par agraph  15 of ECB  Opinio n CON/2005/24. 
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Securities Co mmis sions (IOSCO)13; and (ii) at Communit y level, i n the joi nt work of  the E SCB 
and the Committee of European Securiti es Regulators (CESR) in establishing c ommon 
recommendations for E uropean Union SSS14, the m andate for which has recently been reaffirme d 
by the Council15. 
 
This opini on will be publis hed on t he ECB’s website.  
 
 
Done at Frankfurt am  Main, 2 Decem ber 2008 . 
 
[signed ] 
 
The President of the ECB 
Jean-Claude TRICHET 
                                                      
13  See e.g . joint C PSS-IOSCO pu blications ‘Reco mmendations  for securities settlement s ystems’, November 2001 and 
‘Recommendations for Central Counterpar ties’, November 2 004; publicatio ns available on  the BIS website at 
www. bis.org. 
14  See press release available on the ECB’s website at www. ecb.europa. eu. 
15  See: Council C onclusions on clearing and settlem ent, 2872n d Econom ic and Financi al Aff airs Counci l meeting, 
Luxembourg, 3  June 2008. 
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