EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 4 November 2004 
at the request of the Hungarian Ministry of Finance  
on a draft law amending the Law on Magyar Nemzeti Bank 
(CON/2004/35)  
 
1. On 13 October 2004 the European Central Bank (E CB) 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 Magyar Nemzeti Bank (hereinafter the ‘MNB Law’). 
2. The ECB’s competence to deliver an opinion is based on the third indent of Article 2(1) of Council 
Decision 98/415/EC of 29 June 1998 on the consul tation of the European Central Bank by national 
authorities regarding draft legislative provisions1, as the draft law contains provisions concerning a 
national central bank (NCB). In accordance with the first sentence of Article 17.5 of the Rules of 
Procedure of the European Central Bank, th e Governing Council has adopted this opinion. 
3. The draft law’s officially stated intention is to facilitate the achievement and maintenance of price 
stability by increasing the number of Monetary Council members and by further separating the 
decision-making and executive tasks.  Currently, the Monetary Council consists of nine members. 
The draft law would introduce nine as a minimu m and establish a maximum of 11 members. 
Articles 2, 3 and 6 of the draft law also significantly change the composition and rules for nominating Monetary Council members. At prese nt, the Governor of Magyar Nemzeti Bank 
(MNB), as well as the three Deputy Governors, are Monetary Council members ex officio. The 
other five Monetary Council members are nomina ted by MNB’s Governor, and are, on the Prime 
Minister’s consent, appointed by the President  of the Republic. In addition the Governor is 
nominated by the Prime Minister before being appointed by the President. Following the changes, the Governor will continue in the Monetary Coun cil, as will the Deputy Governor responsible for 
monetary policy. Moreover, four members will con tinue to be nominated by the Governor, and be 
appointed by the President upon the consent of the Prime Minister. The remaining three to five members would be nominated by the Prime Minister , with the right of appointment remaining with 
Hungary’s President. Thus, as a result of the am endments, two MNB Deputy Governors would lose 
their ex officio membership of the Monetary Counc il. It is unclear from the draft law whether they 
could still be nominated by the Governor as other Monetary Council members. 
                                                     
 
1 OJ L 189, 3.7.1998, p. 42. 
 
2 4. The ECB notes that the current Monetary Council ru les in force are compatible with central bank 
independence and provide an appropr iate framework for the formulation of monetary policy. This 
view has been reflected in both the Convergen ce Report of the European Commission and the 
ECB’s Convergence Report for 2004. From this point of view, there would thus be no need for changes to the Monetary Council’s composition.  
5. The draft law’s statement of reasons indicates that ‘the Monetary Council is MNB’s supreme 
decision making body, so it is not justified that  the Deputy Governors responsible for executing 
decisions - except the Deputy Governor responsible for monetary policy – participate in taking this 
body’s decisions’. While, as pointed out in paragr aph 3, it is unclear whether this reasoning has 
actually been transposed into th e draft law, there is no convinci ng need to separate decision-making 
and executive tasks in the field of monetary polic y. By way of example, all ECB Executive Board 
members are members of the ECB’s Governing C ouncil, the Eurosystem’s main policy decision-
making body.  
6. 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. The Convergence Reports of the European Monetary Institute (EMI) and of the 
ECB have, over the years, consistently confirme d the importance of central bank independence. 
The functional, institutional, personal and financia l aspects of independence have also been further 
refined through ECB opinions.   
7. Given the relevance of central bank independ ence for EMU’s proper functioning, this is 
unambiguously anchored in Article 108 of the Treaty and Article 7 of the Statute of the European System of Central Banks and of the European Central Bank and supported by Article 14.2 of the 
Statute. Article 14.2 provides for the security  of tenure of NCB Governors. The EMI’s 1998 
Convergence Report pointed out that personal indepe ndence would be jeopardised if the same rules 
for Governors’ security of tenure were not also applied to other members of NCB decision-making 
bodies involved in the performance of ESCB-related tasks. The abovementioned Treaty and Statute 
provisions require comparable security of tenure, as Article 14.2 of the Statute does not restrict the security of tenure of office to Governors, whilst Article 108 of the Treaty and Article 7 of the Statute refer to any members of NCB decision-making bodies rather than to Governors specifically. This applies in particul ar where a Governor is primus inter pares  between colleagues with 
equivalent voting rights or where such other memb ers may have to deputise for the Governor. This 
approach, adopted in the EMI’s 1998 Convergence Re port, was fully shared by the Commission in 
its 1998 evaluation of the compatibility of NCBs’ statutes with the Treaty under Article 121(1) 
 
3 and (2), and has been accepted by the Council.  The ECB has reiterated this principle in its 
opinions in response to previous consultations. 
8. The ECB notes that according to th e draft law, two of the Deputy Governors would lose their ex 
officio membership of the Monetary Council. In th is context the ECB would like to point out that 
in order to protect the personal independence of  the members of NCB decision-making bodies, any 
reorganisation of an NCB affec ting its Monetary Council members’ tenure of office should allow 
incumbents to continue to perform their duties un til the end of their term of office for which they 
have been appointed, in accordance with Article 14.2 of the Statute. The tenure of the affected two 
Deputy Governors as Monetary Council members h as not expired, and therefore the draft law 
amounts to an ex lege revocation of these two members on grounds other than those foreseen in the 
abovementioned provision. Such revocation should be avoided in the light of Article 108 of the 
Treaty and Article 14.2 of the Statute. The ECB th erefore objects to the termination of two of the 
Deputy Governors’ membership of the Monetary Council prior to the expiry of their term of office.  
9. The ECB notes that the draft law increases the Prime Minister’s role and influence in determining 
the Monetary Council’s composition. The argument put  forward for this change is enhancement of 
central bank independence. Howeve r, as already mentioned the no mination rules for the Monetary 
Council’s members presently in force are compatible  with the Treaty and fully serve the purposes 
of operational efficiency and of safeguarding MNB’s independence from the political sphere.  
10. The ECB furthermore notes that it would enhan ce the long-term independence of the decision-
making body if vacancies in the Monetary Council ar e not filled ‘en bloc’, but instead there is a 
system in place whereby members ar e appointed and their term of office expires at different times, 
allowing sufficient interim periods between subse quent appointments. This would ensure that 
membership of the decision-making body is not determined by political cycles. Similarly, a reference may be made to the principle laid down in  Article 11.2 of the Statute, so that members of 
the Monetary Council are ‘appointed from among pe rsons of recognised standing and professional 
experience in monetary or banking matters’. 
11. The ECB notes that Article 4 of the draft law intends  to amend the rules in Article 53(1) and (7) of 
the MNB Law relating to the annual adjustment to  the remuneration of MNB’s Governor. The new 
provision will link it to planned instead of to actual inflation.  
12. The ECB further notes that Article 5 of the draft la w intends to amend Article 58/A (1) to (3) of the 
MNB Law, changing the rules relating to the auth ority to decide on the publication of wealth 
declarations to be made by the Governor, Deput y Governors, members of the Monetary Council 
and members of the Supervisory Board. Although in  principle making the Governor and Monetary 
Council members subject to a wealth declaration requirement is acceptable, it should be fully 
ensured that the application of these provisions ta kes full account of Article 108 of the Treaty and 
Article 7 of the Statute. The ECB welcomes the tr ansfer of the right to make the abovementioned 
wealth declaration public from Hungary’s Prime Mi nister and President to Parliament’s Chair, as 
this change further enhances the guarantees of personal independence. 
 
4 13. The ECB’s General Council has recently approved the 2004 Convergence Re port (available on the 
ECB’s website at www.ecb.int). This report in cludes an assessment of the compatibility of 
Hungary’s relevant national legislation with the Treaty and indicates the necessary adaptations to 
the MNB Law. The ECB would recommend that any amendment to the MNB Law should take such assessment into account.  
14. This opinion will be published on the ECB’s website.  
  Done at Frankfurt am Main, 4 November 2004.  
 
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET