EN ECB -PUBLIC 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK  
of 12 February 2013  
on deposit  taking and securities account manag ement by  the Treasury  
(CON/2013/ 12) 
 
Introduction and legal basis  
On 21 January 2013, the European Central Bank (ECB) received a request from the Hungar ian Ministry 
for the National Economy for an opinion on the  draft law amend ing several laws implementin g 
Government Resolution 1101/2012 (IV. 5.) on measures necessary to increase the stock of government 
debt held by households  (hereinafter ‘the Government  Resolution’) . 
The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the sixth 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 provisions
1, as the draft law concerns rules applicable to financial institutions insofar as they 
materially influence the stability of financial institutions and markets. In a ccordance 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 amends several laws as  follow s. 
(i) The Law on credit institu tions and financial enterprises
2 to enable the Hungarian Treasury to accept 
deposits. These amendments will , inter alia , provide for:  
(a) the conditions for the Hungarian Financial Supervisory Authority (HFSA) to grant and 
revoke  a licence f or the Treasury  to accept deposits and manage securities accounts;  
(b) the Treasury to join the Hungarian  Deposit Insurance Fund;   
(c) the Treasury providing  information on its activities , similarly to credit institutions , to the 
relevant  authorities ; 
(d) the Treasury to be subject to t he supervision of the HFSA, which will have the power to 
impose sanctions on the Treasury should it not meet the statutory requirements for accepting 
deposits and managing securities accounts.  
                                                           
1  OJ L 189, 3.7.1998, p. 42.  
2  Law CXII of 1996.  
ECB -PUBLIC 
2 (ii) The Law on preventin g and combating money laundering and t errorist financing3 to ensure that the 
Treasury is subject to the same requirements in combating money laundering as any other financial 
institution.  
(iii) Several  laws governing specific  employment relationships ( laws on the officers of the armed 
forces4, the civil servants5, the public servants6 and the Labour Code7) to enable public service 
employees to give a standing order to their employers to transfer a specific amount of their salaries monthly to a securities account held at the Treasury for the purposes of purchasing government 
securities. In the understanding of the ECB, the  standing order would be voluntary, revocable and 
subjec t to automatic revo cation  on termination of the employment relationship. The draft law 
prohibits public sector employers from charg ing employees for making the transfers to the 
Treasury.  
The draft law will enter into force on 1 April 2013. The Treasury would be subject to a licens ing 
procedure and significant restructuring of its activities and institutional set- up for its new tasks. In this 
respect , the draft law does not specify  when the Treasury  would start providing these new services to the 
public and to public service employees. 
 
2.  General observations  
2.1 Scope of the consultation  
The ECB assess es only the broader implications  of the draft law for financial stability and for the 
financial soundness of the proposed new Treasury activities. Given  that the draft law is part of a  
wider legislative framework  mentioned in paragraph 5, on which the ECB has no further 
inform ation, a comprehensive  assessment of the detailed rules for entrusting the Treasury with 
deposit taking and securities account manag ement is beyond the scope of th is opinion. However, 
the ECB has to be consulted on all additional  elements of this wider legislative fr amework which 
fall within its competence under  Article 2 of Decision 98/415/EC, also with a view to 
Article 127(5) of the T reaty , which provides that the European System of Central Banks 
contributes to the smooth conduct of policies pursued by the competent authorities relating to the 
prudential supervision of credit institutions and the stability of the financial system.  
2.2 Appropriate time to consult the ECB  
The ECB received the request from the Ministry for the National Economy for an urgent 
consultatio n on the draft law on 21 January 2013, requesting the ECB’s opinion to be adopted by 
11 February 2013.  
                                                           
3  Law CXXXVI of 2007.  
4  Law XLIII of 1996.  
5  Law CXCIX of 2011.  
6  Law XXXIII of 1992.  
7  Law I of 2012.  
ECB -PUBLIC 
3 According to Article 4 of Decision 98/415/EC, the ECB must be consulted ‘at an appropriate stage’ 
in the legislative process. This implies that the cons ultation should take place at a point in the 
legislative process that affords the ECB sufficient time to examine the draft legislative provisions and adopt its opinion.  
Following from the wording of Article 3(4) of Decision 98/415/EC, Member States are obl iged to 
suspend the process for adoption of the draft legislative provision pending submission of the ECB’s opinion to allow the relevant national authorities to meaningfully consider the ECB’s opinion prior 
to adoption of the provisions.  
In this respect, the ECB once again stresses that even cases of particular urgency do not relieve 
national authorities from their duty to consult the ECB at an appropriate stage in legislative process  
that allows  sufficient time for (i) the ECB to examine the draft legislative provisions and adopt its 
opinion, and (ii) the national authorities  to take into account the ECB’s views in accordance with 
Decision 98/415/EC. Therefore, the ECB would appreciate the Ministry honouring its obligation to 
consult the ECB in due time i n the future.  
 
3. Prohibition o n monetary financing  
Article 123 (1) of the Treaty  prohibits  overdraft facilities or any other type of credit facility with the ECB 
or the national central banks of the Member States in favour of Union institutions, bodies, o ffices or 
agencies, central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of Member States, and the purchase of debt instruments directly from them by 
the ECB or national central banks . This prohibition prevents central banks from providing overdraft 
facilities or any other type of credit facility to the public sector, including any financing of the public 
sector’s obligations vis- à-vis third parties.  
The ECB understands that the Treasury will not become a credit institution. Therefore, provided the ECB’s  understanding is correct  and the Treasury  will remain  part of the public sector within the meaning 
of Article 123 of the Treaty , and will not be an eligible counterparty for central ba nk refinancing 
operations, the ECB has no monetary financing concerns at this stage  of the legislation . 
 
4. Impact of the draft law on financial institutions  
Though intended to facilitate households’ access to the government bond market, the draft law give s the 
Treasury broader powers to act as a deposit -taking institution. The draft law does not explicitly preclude 
the Treasury from offering ATM withdrawals and bank transfers, or using the float on household 
accounts held with it , i.e. any portion of the t ransferred funds that is not immediately invested in 
government securities, to temporarily finance the deficit.  
Deposit -taking  would place the Treasury, a public institution, in direct competition with banks, which are 
operated as for -profit commercial en tities. Unless the unit of the Treasury entrusted with deposit services 
to households is completely ring- fenced  from the rest of the Treasury functions , and is subjected to the 
same regulatory, supervisory and tax burden as commercial banks, the Treasury w ill have  an advantage 
ECB -PUBLIC 
4 over commercial banks in attracting deposits . This c ould distort competition in the banking sector and 
potentially lead funds currently a vailable to banks to be diverted to direct financing of the G overnment . 
The resultant reduced len ding capacity of banks would  further limit corporations ’ and households ’ access 
to credit , potentially undercutting  economic growth . In addition, any  associated loss of net interest and fee 
income by banks will lower  their profitability . 
Therefore , the ECB recommends that a comprehensive impact study of the draft law on the financial 
sector, with input from affected parties such as banks and  investment firms , is carried out prior to  
submitting  the draft law to Parliament. Based on t he findings, steps should  be taken to minimis e the  
potential adverse impact s of such measures on financial stability and the economy.  
 
5. Suitability of the Treasury to carry out the new tasks  
In general, it is possible for the State as a shareholder to own credit institutions car rying out semi -public 
functions while operating under general market conditions, with the shareholder bearing all the 
consequences of the credit institution carrying out its functions at a profit or at a loss. However, the draft 
law does  not follow this ap proach.  
An entity  entrusted  with the new tasks set out in  the draft law should also be  provid ed with the expertise, 
structural set -up and financial resources necessary to carry out these functions. The draft law entails  no 
such provision s. The ECB  is aware of that the draft  law is part of a planned broader legislative framework 
to implement the Government Resolution. As managing deposit and securities accounts for the public are not core tasks for a budgetary institution, the Government Resolution foresees the amendment of several 
legal acts, and also provides for several agreements to enable the Treasury to, inter alia , develop its 
information technology infrastructure and obtain new offices for the public to access. Furthermore, it provides for the Governm ent Debt Management Agency to change its practice relating to the maturity of 
government bonds intended for households, the possibility to involve the Hungarian Postal Services and its offices for the public to open accounts with the Treasury, and, similar ly, the possibility to involve 
government public service offices for this purpose. However, the ECB has no further information on any 
of the a dditional draft laws and  arrangements necessary to implement the Government Resolution . 
The envisioned new tasks m ust not interfere with the proper functioning of the core Treasury tasks or 
with sound practices of public debt management. More specifically, a possible shortening of government debt maturities would tend to increase short -term fiscal vulnerabilities due to higher rollover risks.  As 
regards the provisions of the Government Resolution creating a wider framework for the draft law, the ECB notes that any changes in the Government Debt Management Agency’s practice relating to the 
maturity of government bonds s hould minimise fiscal risks.  
Also with respect to the observations  below , the ECB is of the view that an entity operating a s a credit 
institution rather than  a budgetary institution should provide for a more transparent and prudent 
operational framework for the fulfilment of these tasks.   
 
ECB -PUBLIC 
5 6. Effectiveness of the safeguards assigned to the new activities of the Treasury  
The draft law introduce s safeguard s for the lawfulness of the Treasury’s new deposit -taking activities.  
Deposit -taking by the Treasury woul d in effect  result in  the Treasury  operat ing as a bank, s o such 
activities would be subject to regular banking supervision. A s both the Treasury and the HFSA are public 
institutions run by the S tate, it must be ensured that the Treasury is properly supervi sed and that the 
HFSA’s micro -prudential supervision treats the Treasury equal ly to other credit institutions .  
 
7. Provision of information on deposit taking liabilities to the national central bank  
The ECB s upports  the provision of information by the Tre asury on deposit taking  liabilities to the 
national central bank, as  they may be regarded as central government deposit  liabilities  with a monetary 
character. The ECB directs the national authorities to Article 6 and Part 3 of Annex III t o Guideline 
ECB/20 07/9 of 1 August 2007 on monetary, financial institutions and market statistics8. 
 
This opinion will be published on the ECB’s website.  
 
 
Done at Frankfurt am Main, 12 February 2013.  
 
[signed]  
 
The President of the ECB  
Mario DRAGHI  
                                                           
8  OJ L 341, 27.12.2007, p. 1.