EN ECB-P UBLIC  
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 22 December 2011 
on the Magyar Nemzeti Bank’s independence 
(CON/2011/106) 
 Introduction and legal basis
 
On 2 November 2011, the European Central Bank (E CB) received a request from the Hungarian Ministry 
for the National Economy for an opinion on a draft law replacing the Law on the Magyar Nemzeti Bank and, on 14 December 2011, the ECB adopted Opinion CON/2011/104. On 21 December 2011, the ECB received a request, dated 13 December 2011, from the Hungarian Ministry for the National Economy for an opinion on a revised draft law. This version of th e draft law, which was submitted to the Parliament on 
13 December 2011, contained substantive amendments  compared to the version of 2 November 2011. 
However, the ECB is aware that also other changes ha ve been tabled in the meantime, which it has not yet 
received. This opinion is based on the latest version of this law
1 (hereinafter the ‘revised draft law’). 
Furthermore, the ECB has also le arned that new draft amendments to the Hungarian Constitution have 
been tabled, which relate to the Magyar Nemzeti Bank (MNB) and would allow for a merger of the 
central bank with the Financial Supervisory Authorit y (FSA) into a separate new body (hereinafter the 
‘draft constitutional law’)2. The draft constitutional law has not been submitted to the ECB for 
consultation. This breaches the obligation to consult the ECB. 
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 third 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 provisions3, as the revised draft law and the draft c onstitutional law relate to the MNB. In 
accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central 
Bank, the Governing Council has adopt ed this opinion, which is as rega rds the draft constitutional law an 
own-initiative opinion. 
 1.  Purpose of the draft laws The revised draft law will recast Law LVIII of 2001 on the Magyar Nemzeti Bank (MNB) (hereinafter the 
‘MNB Law’). The revised draft law submitted to Parl iament contains substantive amendments compared 
to the version submitted to the ECB on 2 November 2011, in particular as regards macroprudential and 
                                                 
1  Draft law T/5248 on the Magyar Nemzeti Bank, togeth er with the following propose d amendments:  5248/4, 5248/5 
2  5005/54 – proposed amendment to draft law T/5005 on the Transitional Measures to the Basic Law of Hungary. 
3 OJ L 189, 3.7.1998, p. 42. 
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2 remuneration policy. It introduces a general dele gation of implementing powers from the Monetary 
Council to the Executive Board and changes the MNB’s sanctioning rules. The macroprudential 
supervision provisions were missing from the revised dr aft law, but the tabled amendments reinstated 
them. A deletion of the general cap on the remunerati on of employees below management level is tabled; 
however, no amendments are proposed to the remune ration of the Governor, the Deputy Governors and 
the Supervisory Board members. 
The draft constitutional law enables a merger betwee n the MNB and the FSA and allows their respective 
powers to be transferred to a newly created legal su ccessor of both institutions. At the same time, the 
MNB’s Governor and the FSA’s President will beco me Vice-Presidents, under the authority of a new 
president to be appointed by the President of H ungary. The draft constitutional law does not specify the 
nature of this new institution. 
 2.  The appropriate time to consult the ECB The consulting authority submitted the revised draf t law to the ECB without requesting an urgent 
procedure or setting a time limit for the ECB’s opinion . On 13 December 2011, the revised draft law was 
submitted to the Hungarian Parliament under an urgent  procedure to enable the new MNB Law to enter 
into force by 1 January 2012.  
The ECB reiterates its position that even cases of par ticular urgency do not relieve national authorities 
from their duty to consult the ECB and to allow su fficient time to take into account its views in 
accordance with Decision 98/415/EC. Any substantive amen dments to a draft law have to be submitted to 
the ECB to allow it to adopt an op inion on the most recent legislative text and the process of adoption of 
the draft law should be suspended. The ECB’s obser vations on provisions on which it was consulted do 
not eliminate a breach of the consultation obligation with regard to subsequent  substantial amendments. 
The ECB would appreciate the Ministry for the Na tional Economy giving due consideration to honouring 
its obligation to consult the ECB in the future 
 3.  Draft constitutional law - prop osed merger of the MNB with the FSA 
The draft constitutional law amends th e Constitution and allows the MNB to  be merged with the FSA into 
a new institution. The ECB understands that the ne w institution will have legal personality and would 
qualify as the central bank of Hungary and as a member of the European System of Central Banks (ESCB). It appears that the President of the new institution will be a member of the ECB’s General 
Council and thus replace the current MNB’s President in  that role. From the perspective of compatibility 
with the Treaties and the Statute of the European System  of Central Banks (hereinafter the ‘Statute of the 
ESCB’), the manner in which this merger is implemente d is crucial, and this is not clear from the draft 
constitutional law.  
In particular, the new institution should be fully inde pendent with a precise definition of its mandate in 
compliance with the central bank independence principl e, including functional, in stitutional, financial and 
personal independence, and with the role of the cen tral bank as part of the ESCB. The new institution’s 
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3 primary objective must be price stability and any other tasks with which it is entrusted must not interfere 
with ESCB-related tasks. The financing and manage ment of the new institution’s financial and human 
resources must comply with central bank financial in dependence. Moreover, in order to comply with the 
monetary financing prohibition, the national centr al bank (NCB) must be insulated from financial 
obligations resulting from the FSA’s prior activities4. 
The draft constitutional law also raises concerns as regards the personal in dependence of the MNB’s 
Governor in office. By appointing a new president w ith authority over the two institutions, once they are 
merged, and over the current MNB’s Governor, once he  becomes Vice-President of the new institution, 
the personal independence of the MNB’s Governor woul d be impaired and Article 14.2 of the Statute of 
the ESCB concerning the possible reasons for dismissing an NCB governor would be breached.  
It is important that the ECB is consulted on the la w establishing the new institution in good time to allow 
the Hungarian authorities to take the ECB’s opinion into account in the legisl ative process in accordance 
with Decision 98/415/EC. 
 4.  Revised draft law  
4.1 The number of Monetary Council members and decision-making 
The ECB reiterates its observations in Opini on CON/2011/104 on the composition of the MNB’s 
decision-making bodies, as well as the observations in  connection with the adverse effect of the 
frequent changes to the institutional framework. Ag ainst the backdrop of the constant changes in 
the composition of the MNB’s decision-making bodies, the increase in the number of Monetary Council members, together with the possibility of increasing the number of deputy governors – 
without due consideration of the MNB’s needs – giv es rise to concerns whether this could be used 
to influence the decision-making process to th e detriment of central bank independence.  
Moreover, the revised draft law needs to provid e for a smooth transition in the decision-making 
process and to ensure the MNB’s operational continuity
5. 
4.2 Governor’s reporting obligations 
The ECB reiterates its observations in Opinion CON/2011/104 that the purpose of the obligation to 
forward the agenda of the meetings of  the Executive Board to the Government6 is unclear. The 
Government representative participates without vot ing rights in the Monetary Council and not in 
Executive Board meetings. This obligation should be clarified to avoid the impression that the 
Government actively takes part in Executive Board decision-making.  
                                                 
4  See ECB’s Convergence Report, May 2010, p. 25. 
5  See paragraph 5.2 of Opinion CON/2011/104. All EC B Opinions are available on the ECB’s website at 
www.ecb.europa.eu. 
6  See Article 34(1) of the revised draft law. 
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4 4.3 Changes in the salary structure - financial and personal independence  
The ECB’s Convergence Reports in 2008 and 2010, and several ECB opinions7 on autonomy in 
staff matters, stressed that Member States may not impair an NCB’s ability to recruit and retain the 
qualified staff necessary for the NCB to perform independently the tasks conferred on it by the Treaty, the Statute of the ESCB and national legisla tion. Furthermore, an NCB may not be put into 
a position where it has limited or no control over its staff, or where a Member  State’s government is 
in a position to influence the NCB’s policy on staff matters.  
To protect the MNB’s autonomy in staff matters, in accordance with the principle of central bank 
independence under Article 130 of the Treaty, the Hungarian authorities must ensure that any amendment to the legislation on the remuneration of the MNB’s staff is decided in close cooperation with the MNB, taking due account of the MNB’s views
8 regarding the impact of such 
legislative amendments on its ongoing ability to ca rry out its tasks. The concern remains that the 
repeated amendments to the legislation during the last 18 months on salaries of the members of the 
MNB’s decision-making have been implemented without taking into account the above aspects of the MNB’s financial independen ce addressed in previous opinions
9. Therefore, the observations in 
CON/2011/104 are still valid. 
4.4 MNB role in macroprudential supervision   
The ECB understands that the MNB’s new macroprude ntial mandate to identify, monitor and assess 
risks to financial stability and take on macroprude ntial policy in Hungary had been deleted in one 
of the amendments re-submitted for consultation, bu t has since been reinserted in the revised draft 
law. Central banks are natural candidates to be  assigned a formal macroprudential mandate, given 
the potential synergies with traditional central bank functions relating to  promoting financial 
stability. Furthermore, independence – which is an essential element in central banking – is also a 
necessary precondition for macroprudential supervis ion. Moreover, the revised draft law should 
ensure that the MNB’s macroprudential mandate does not interfere with the effective fulfilment of 
its monetary policy mandate, in particular with its  primary objective of maintaining price stability, 
and that it does not restrict the Eurosystem’s contribution to the stability of the financial system under Article 127(5) of the Treaty. 
The MNB needs to be equipped with tools and powers to efficiently fulfil all the tasks attributed to 
it. In this respect, the ECB notes that the only to ol mentioned in the revised draft law is the 
adoption of a decree by the Governor to prevent the build-up of system risks or to reduce such risks 
in areas not regulated in law or government decrees. 
The ECB also notes that, as the general rules allow the MNB to collect data in the central banking 
information system, these provisions of the revised draft law would enable the MNB to collect data 
specifically in respect of its macroprudential mandate. In this respect, it is of crucial importance, if 
                                                 
7  ECB Opinions CON/2008/9, CON/2009/45, CON/ 2009/47, CON/2010/42, CON/2010/51 and CON/2010/56.  
8  See for example paragraph 4.3 of ECB Opinion CON/2010/42 and Opinion CON/2010/56. 
9  See CON/2010/56 and CON/2010/91.  
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5 the MNB is to effectively fulfil its new macroprudential mandate, that it receives in a timely 
manner all necessary data and information, in cluding information specific to supervised 
institutions, and that it may designate – in coope ration with the micro-prudential supervisor – 
systemically relevant financial structures and institutions. 
4.5 Establishment of the balance sheet and the decision on the payment of dividends 
The ECB reiterates its observations in Opinion CON/2011/104 on the transfer of these functions 
from the shareholder to the Executive Board. The a ffirmative decision by the shareholder in Article 
43(2) of the revised draft law leaves room for doubts over whether profit distribution decisions will continue to be subject to the shareholder’s resolutions
10. Hence, this provision, in conjunction with 
Article 49(4) and Article 64 of the revised draft la w, should be clarified so as to comply with the 
financial independence of the MNB. 
4.6 Prohibition on monetary financing  
The ECB reiterates its observations in Opin ion CON/2011/104 on the monetary financing 
prohibition. In particular, the ECB notes that Article 13 of the revised draft law still needs to expressly include also the condition that loans to  the National Deposit Insurance Fund are granted 
at the full discretion of the MNB
11.  
4.7  Central banking information system  
The ECB notes that the revised draft law still lack s clarity and leaves the rules on code generation 
used for anonymised data unchanged12. Article 21(6) and (13) of the revised draft law still contains 
contradictory provisions on the deadline for the d estruction of the linking codes used in handling 
anonymised data. 
4.8 Legal integration of the MNB into the Eurosystem 
The ECB reiterates its observations in Opini on CON/2011/104 on Hungary being a Member State 
with a derogation and therefore obliged to comp ly with all adaptation requirements under the 
Treaties. The Hungarian authorities should take th is opportunity offered by the recast to make the 
necessary adjustments to ensure the MNB’s full integration into the Eurosystem when Hungary 
adopts the euro13.  
 
This opinion will be published on the ECB’s website.  
 
Done at Frankfurt am Main, 22 December 2011. 
[signed] 
The President of the ECB 
Mario DRAGHI 
                                                 
10  See also ECB Convergence Report May 2010, p. 249. 
11  See paragraph 9.3 of Opinion CON/2011/104. 
12  See paragraph 10 of Opinion CON/2011/104. 
13  For more detail, see paragraph 13 of Opinion CON/2011/104.