EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 25 March 2009 
at the request of the Hungarian Minister for Finance 
on a draft government regulation on the procedur al rules for State guarantees in the interests of 
stabilising the financial system 
(CON/2009/28) 
 Introduction and legal basis
 
On 17 March 2009 the European Central Bank (ECB) rece ived a request from the Hungarian Minister for 
Finance for an opinion on a draft government regulati on on the procedural rules for State guarantees in 
the interests of stabilising the financial syst em (hereinafter the ‘draft regulation’).  
The ECB’s competence to deliver an  opinion is based on Article 105(4) of the Treaty establishing the 
European Community and on the sixth indent of Article 2(1) of Council Decision 98/415/EC of 29 June 1998 on the consultation of the European Ce ntral Bank by national authorities regarding draft 
legislative provisions
1, as the draft regulation relates to rules app licable to financial institutions insofar as 
they materially influence the stability of financial institutions and markets. 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 regulation 1.1 The legal basis for the adoption of the draft regulation is the Law on strengthening the financial 
intermediary system (hereinafter the ‘Law’)
2, which was intended to limit the effects of the global 
financial crisis in Hungary and maintain its financial stability. To that end, the Law provides inter 
alia that the Hungarian State is authorised to guarantee credit institutions’ debts vis-à-vis their 
creditors subject to the cumulative fulfilment of the following conditions: (a) the Chair of the 
Hungarian Financial Supervisory Au thority’s Supervisory Council and the Governor of the Magyar 
Nemzeti Bank (MNB) jointly propose the guarantee; (b) the debt is based on a loan agreement or 
debt security; (c) the credit institution’s debt matu rity is between three months and five years; 
(d) the credit institution’s debt arises between  the entry into force of the draft law and 
31 December 2009; (e) the debt is denominated in euro, Swiss francs or forint. The aggregated 
                                                 
1  OJ L 189, 3.7.1998, p. 42.  
2  Act CIV/2008 on reinforcing the stability of the financial intermediary system. Magyar Közlöny , 22 December 2008, 
p. 24618. 
2 amount of the State guarantee may not exceed HUF 1 500 billion. Article 7(8) of the Law provides 
that procedural rules related to the guarantees provided under the Law shall be laid down in a 
regulation by the Government. 
1.2 The draft regulation lays down detailed procedural  provisions for applications for and grants of 
State guarantees to beneficiary institutions. It sets out  the procedure for the approval of applications 
for guarantees, the requirements relating to the pr ovision of information, and detailed rules for 
enforcing the guarantees. The draft regulation also pr ovides that agreements en tered into with credit 
institutions must specify the credit institutions’ commitments in relation to lending activities and 
other commitments and the conseque nces of breaching such commitments. 
1.3 In line with the Law, the draft regulation will apply until 31 December 2009.   2. General observations 
2.1 As stated, the draft regulation lays down deta iled provisions for implementing the Law, on which 
the ECB commented in its Opinion CON/2008/81
3. The observations made in Opinion 
CON/2008/81 also apply to the draft regulation. 
2.2 In particular, in line with the ‘Declaration on a concerted European action plan of the euro area 
countries’ issued by the Heads of State of th e euro area on 12 October 2008 (hereinafter the 
‘Declaration’)4, Member States must act in a coordinated manner to avoid significant differences in 
national implementation having a counter-productive  effect and creating distortions in global 
banking markets. The Declaration acknowledges the need to work in cooperation with the ECB to 
ensure consistency with the Eurosystem’s mana gement of liquidity and compatibility with its 
operational framework5.  
2.3 Moreover, the ECB emphasises the importance of ensuring that the proposed arrangements comply 
with the relevant Community law provisions, incl uding European Union single market principles 
and financial services legislation, as well as competition and State aid rules.  
2.4 In paragraph 3.5 of its Opinion CON/2008/81 the ECB noted that State guarantees to cover 
interbank deposits should be avoi ded as they have the potential to interfere with the conduct of a 
central bank’s liquidity-providing operations, and thus with the transmission of monetary policy 
decisions6. In particular, the ECB considered that State guarantees to be provided under the Law 
could relate to the repayment of unsecured loan s drawn by a borrower bank from another bank, in 
which case the guarantee could have the same effect as a guarantee for the repayment of an 
                                                 
3  ECB Opinion CON/2008/81 of 1 December 2008 at the request of the Hungarian Ministry of Finance on a draft law on 
strengthening the financial intermediary system. 
4  The Declaration is ava ilable on the French Presidency’s website at www.ue2008.fr. 
5  See paragraphs 2.2 and 3.2 et seq. of Opinion CON/2008/81. 
6  See paragraph 3.2 of ECB Opinion CON/2008/50 of 17 Octobe r 2008 at the request of the Belgian Ministry of Finance 
on a draft royal decree adopted under Article 117 bis of the Law of 2 August 2002 on the supervision of the financial 
sector and on financial services. 
3 interbank deposit. In this context, the ECB reite rates its recommendation that the provision of State 
guarantees which have the same effect as guarantees for deposits should be avoided.  
2.5 Finally, the ECB refers to the Recommenda tions of the Governing Council of the ECB on 
government guarantees for bank debt7. On this basis, the ECB reiterates its position that the price of 
a State guarantee should be risk-based and market-o riented, and determined on the basis of the 
costs of a corresponding guarantee in the market. It is important that the pricing of a State guarantee should link the level of charges to be pa id by a credit institution receiving a guarantee to 
the residual maturities of the guaranteed oblig ations with maturities exceeding one year. 
 3. Specific observations 
In line with the Law, the draft regulation provides for the involvement of the MNB, but limited only to 
the process of granting guarantees. In particular, the ECB understands that the Governor of the MNB 
gives his opinion on whether the provision of a guarantee to a given credit institution is justified in the light of the liquidity situation and the role of the cr edit institution in the financial system. It is understood 
that the involvement of the MNB will not go beyond this advisory role. In this context, the ECB recommends that the MNB should also be informed wh en the activation of a guarantee is expected, as 
provided for in Article 7(1) of the draft regulation in the case of the minister responsible for the state 
budget and the Government Debt Management Agency. 
 This opinion will be published on the ECB’s website.    Done at Frankfurt am Main, 25 March 2009. 
 
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET 
                                                 
7  See the Recommendations of the Governing Council of th e European Central Bank on government guarantees for bank 
debt, issued on 20 October 2008 and availabl e on the ECB’s website at www.ecb.europa.eu.