EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 24 May 2007 
at the request of the Hungarian Ministry of Finance  
on a draft law amending the Law on the Magyar Nemzeti Bank 
(CON/2007/14)  
 
Introduction and legal basis  
On 27 April 2007 the European Central Bank (ECB) rece ived 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 Bank (hereinafter the ‘MNB Law’). 
The ECB’s competence to deliver an  opinion is based on Article 105(4) of the Treaty establishing the 
European Community and the third indent 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 
provisions1, as the draft law relates to the Magyar Nemze ti Bank. In accordance with the first sentence of 
Article 17.5 of the Rules of Procedure of the Europ ean Central Bank, the Governing Council has adopted 
this opinion. 
 1. Purpose of the draft law The Ministry of Finance has indicated that the purpose of the draft law is to fa cilitate the efficient and 
economical functioning of the Magyar Nemzeti Bank by  changing its governance structure. The draft law 
would abolish the Board of Directors and transfer mo st of its functions to the Magyar Nemzeti Bank’s 
Governor. In addition, the draf t law would decrease the number of Monetary Council members. 
Currently, the Monetary Council consists of a mini mum of nine and a maximum of 11 members. The 
draft law would reduce the number of members to a mi nimum of five and a maximum of seven members. 
The terms of office for the current members would re main unaffected. Finally, the draft law would also 
modify the scope of the Magyar Nemzeti Bank’s oblig ation to provide information to the Ministry of 
Finance. 
  
                                                     
 
1 OJ L 189, 3.7.1998, p. 42. 
 
2 2. General observations 
2.1 Credibility is the cornerstone of central banking . A credible monetary policy is a key condition for 
controlling inflationary expectations and pr omoting sustainable convergence towards price 
stability. An independent central bank in a stable  institutional environment forms the basis for 
monetary policy’s credibility. The Treaty’s require ment for central bank independence reflects the 
generally held view that the primary objective of price stability is best served by a fully independent institution with a precisely defined manda te. It is therefore of utmost importance to 
design an institutional structure that separates m onetary policy from the influence of short-term 
political interests. Over the years the convergen ce reports of the European Monetary Institute 
(EMI) and of the ECB have consistently confir med the importance of central bank independence. 
The functional, institutional, personal and financia l aspects of independence have also been further 
refined through ECB opinions. 
2.2 One consideration in the context of central ba nk independence is the need for a central bank legal 
framework that provides a stable and long-term basis for the central bank’s functioning. With 
regard to the Hungarian central bank, the ECB not es that the Law on the Magyar Nemzeti Bank has 
been amended on several occasions in recent years, often substantially cha nging the central bank’s 
legal framework, and finds that the introduction of di fferent legal concepts within such a relatively 
short time has adversely affected  the Magyar Nemzeti Bank’s stabilit y. In addition, the ECB notes 
that the draft law still does not address all the i ssues highlighted in the ECB’s Convergence Report 
from December 2006. 
 3. Specific observations  Changes in the Magyar Nemzeti Bank’s governance structure  
3.1 According to the draft law, the Magyar Nemzeti Bank’s Board of Directors, which is in charge of 
the implementation of monetary policy and the ru nning of the Magyar Nemzeti Bank, would be 
abolished. Its powers would be transferred to th e Magyar Nemzeti Bank’s Governor, who would be 
entrusted to carry out these functions as an indivi dual. The ECB understands that the objective for 
introducing this change is efficiency and has no objections to this institutional set-up as such. 
  
 
3 Membership in the Monetary Council 
3.2 With regard to the draft law’s transitional m easures on membership in the Magyar Nemzeti Bank’s 
Monetary Council, the ECB notes, as in its earlier opinions2, that they should be compatible with 
Article 14.2 of the Statute of the European System of Central Banks and the ECB. 
3.3 In general, the principle of personal independe nce, as laid down in Article 14.2 of the Statute 
requires that the same rules for the security of te nure of office of Governor apply to other members 
of NCB decision making-bodies involved in the perfo rmance of ESCB-related tasks. This applies, 
in particular, where a governor is first among e quals between colleagues with equivalent voting 
rights. Thus, any NCB reorganisation measure affecting the tenure of office of the members of its decision-making bodies involved in the performance of  ESCB-related tasks should ensure that they 
continue to perform their duties until the end of their appointed term, in accordance with Article 
14.2 of the Statute
3. In this respect the draft law specifically provides that the term of office of the 
current members of the Monetary Council should remain unaffected by the foreseen amendments. 
In this context, the ECB notes that the effects of the expiration of the mandates for the current 
individual members of the Monetary Council, in th e event that the euro is introduced during their 
mandates, should be clarified in a manner resp ecting the principle of personal independence. 
3.4  In line with its previous opinions the ECB woul d also emphasise that not filling vacancies in the 
Monetary Council en bloc  enhances the long-term independe nce of the decision-making body. 
Instead members’ appointments and expiry of thei r term of office should be at different times, 
allowing sufficient interim periods between subseq uent appointments. This ensures that political 
cycles do not determine membership. Similarly, Article 112(2)(b) of the Treaty establishes the 
principle that members of th e ECB’s Executive Board are ‘appointed from among persons of 
recognised standing and professional experience in monetary or banking matters’. This principle 
should also apply to Monetary Council members. 
Information sharing with the Minister for Finance  
3.5 A new provision of the draft law would require the Magyar Nemzeti Bank’s Governor to inform 
the Minister for Finance of all important d ecisions regarding the Magyar Nemzeti Bank’s 
operations, together with the documents these d ecisions are based on. The proposed amendment 
would broaden the scope of the Magyar Nemzeti Ba nk’s obligation to provide information to the 
Government.  
                                                      
2  See ECB Opinion CON/2007/6 of 7 March 2007 at the request of the German Ministry of Finance on a draft Eighth Law 
amending the Law on the Deutsche Bundesbank, ECB Opin ion CON/2006/44 of 25 August 2006 at the request of the 
Banca d’Italia on the amended Statute of the Banca d’Italia, ECB Opinion CON/2006/32 of 22 June 2006 at the request 
of the French Senate on draft law on the Banque de France, ECB Opinion CON/2004/35 of 4 November 2004 at the 
request of the Hungarian Ministry of Finance on a dr aft law amending the Law on Magyar Nemzeti Bank and ECB 
Opinion CON/2004/16 of 11 May 2004 at the request of the Ital ian Ministry of Economic A ffairs and Finance on a draft 
law on the protection of savings.  
3       See the abovementioned opinions. 
 
4 3.6 Currently the Magyar Nemzeti Bank is obliged to provide the Government with information on 
monetary developments and other important issues relating to its basic tasks on an ad hoc basis, 
and on foreign exchange transacti ons and gold and foreign exchange reserves on a weekly basis. 
The scope of obligation currently in force a ppears adequate to satisfy the Government’s 
information needs. Any obligation imposed on the Magyar Nemzeti Bank to provide information to 
the Government must be within the limits of cent ral bank independence. As a minimum, therefore, 
the draft law (i) should clarify that there is no ob ligation to consult or inform the Government ex 
ante, i.e. in advance of the decisions being taken;  (ii) should not contain a requirement to submit to 
the Government the documents that  the decisions are based on; and (iii) should ensure that the 
provision of information under the new Article 41 (3) of the Law on the Magyar Nemzeti Bank complies with the principles set out below. The ECB’s Convergence Reports in May and 
December 2006 described the prohibition on ex ante  consultation relating to national central banks’ 
(NCBs) decisions as ‘An express statutory obligation for an NCB to consult third parties ex ante 
provides the latter with a formal mechanism to influence the final decision and is therefore 
incompatible with the Treaty and the Statute. Ho wever, dialogue between NCBs and third parties, 
even when based on statutory obligations to provide information and exchange views, is 
compatible with central bank independence provided that: 
– this does not result in interference with th e independence of the members of the NCB’s 
decision-making bodies; 
– the special status of Gover nors in their capacity as members of the ECB’s General Council 
is fully respected; and 
– confidentiality requirements resulting from the Statute are observed.’ 
 This opinion will be published on the ECB’s website.    Done at Frankfurt am Main, 24 May 2007.  
 
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET