EN ECB-P UBLIC  
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 14 December 2011 
on the Magyar Nemzeti Bank 
(CON/2011/104) 
 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 (hereinafter the ‘draft law’).  
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 provisions
1, as the draft law relates to the Magyar Nemzeti Bank (MNB). In accordance with 
the first sentence of Article 17.5 of the Rules of Pr ocedure of the European Central Bank, the Governing 
Council has adopted this opinion. 
 1.  Subject of the draft law 
The draft law will recast Law LVIII of 2001 on the Magy ar Nemzeti Bank (MNB) (hereinafter the ‘MNB 
Law’). The draft law maintains several provision s of the MNB Law, as well as introducing new 
provisions into the current legal framework. Under th e new Constitution effective on 1 January 2012, this 
subject matter will be regulated in a law adopted with  a qualified majority, referred to as an organic law. 
The draft law will introduce several chang es into the MNB’s legislative framework. 
1.1 Decision-making bodies 
The draft law modifies the appointment procedure for the Monetary Council adopted in January 
2011. The Prime Minister rather than the Gove rnor may give recommendations to Hungary’s 
President on deputy governors. The possible number of deputy governors will increase to three and 
the Deputy Chair of the Monetary Council will act  for the Governor in the event of his absence
2. 
                                                 
1 OJ L 189, 3.7.1998, p. 42. 
2  Except for the Governor’s power to adopt decrees which he may delegate to a Deputy Governor of his choice. 
ECB-P UBLIC  
2 The Monetary Council will have five to nine members chaired by the Governor. Its members will 
comprise the Deputy Governors and other members, nominated by Hungary’s President, for six years.  
The draft law reinstates the Executive Board,  with the Governor as Chair, and the Deputy 
Governors to take over the Governor’s impl ementing responsibilities for Monetary Council 
decisions. Its further tasks include in particular  financial management, internal organisation, 
operational management of the MNB and auditing.  The Monetary Council will become the supreme 
decision-maker for all MNB tasks.  
1.2 Monetary policy 
The MNB may set different levels of reserve ratio s for different types of liabilities, individual assets 
and non-balance sheet items of fina ncial institutions and investment  companies. Furthermore, it 
may remunerate the minimum reserves deposited by  the institutions. Remuneration depends on the 
different reserve ratio components. 
1.3 Macroprudential supervision 
The MNB’s task is identifying business and economic  risks threatening the financial system as a 
whole and facilitating the prevention and mitigation of systemic risks. On the basis of the Monetary Council’s decision, the Governor may issue decree s on this matter. Also, the MNB will track the 
operations of major financial instituti ons and assess their liquidity positions. 
1.4 Changes in the salary structure 
The draft law proposes three alternative salary stru cture scenarios linking the remuneration of the 
Governor, Deputy Governors, other Monetary Council members and the Chair and members of the Supervisory Board to a certain baseline, such as  average monthly gross income or the financial 
sector’s average monthly gross income, with th e proviso that no MNB employee monthly salary 
may exceed the salary of the MNB’s Deputy Governors. 
1.5 Relations with the Government, the ministries and the public 
The Governor will be subject to a comprehensiv e reporting scheme to the Parliament on request 
and to the Parliament’s Committee for Economic Af fairs every six months. In addition, the MNB 
will be required to draw up a prior annual opera ting and investment cost plan. The Parliamentary 
Committee for Economic Affairs and the State Audit Office, on the basis of the MNB’s subsequent 
internal performance review, will monitor its adhere nce. Article 31(4) of the draft law sets out the 
competence of the Parliamentar y Committee for Economic Affairs a nd the State Audit Office to 
examine the operational efficiency of the management of the MNB
3.  
The MNB will submit its opinion on the budget proposal to the Minister responsible for budgetary 
matters. However, the MNB will no longer have an  opportunity to submit this opinion to the 
                                                 
3  See for comparison Article 27.2 of the Statute of the ESCB. 
ECB-P UBLIC  
3 Parliament’s relevant committee. Furthermore, th e Governor will present the MNB’s opinion to the 
Budgetary Council. 
1.6 Relations with the general budget 
The forint and the exchange rate equalisation reser ves may be offset against each other. The rules 
for recapitalisation will change as follows. Reca pitalisation will only be available to the 
Government if the balance of the respective e qualisation reserves is negative and this negative 
balance exceeds the sum of the accumulated profit reserve and the balance sheet. The shareholder 
may provide capital injections in cash to the accumulated profit reserve any time throughout the 
year, regardless of the balance of the MNB’s accumulated profit reserve. 
1.7 Relations with the Hungarian Financial Supervisory Authority 
The MNB will cooperate with the Financ ial Supervisory Authority, including, inter alia , 
exchanging information and sharing the results of  its on-site checks in matters falling under the 
Financial Supervisory Authority’s powers.  
1.8 Balance sheet and dividend payments  
In the future, the Executive Board rather than the shareholder will adopt the MNB’s balance sheet, 
financial statement, profit and loss statement, as we ll as decisions on dividend payments, subject to 
an affirmative resolution by the shareholder. 
 2. Need for a stable institutional framework 2.1  Previous ECB Opinions
4 repeatedly highlighted the key role of credible monetary policy in 
controlling inflationary expectations and pr omoting sustainable convergence towards price 
stability. A credible monetary policy is rooted in an independent central bank with a stable 
institutional environment. The Treaty’s requirement of central bank independence reflects the view 
that the primary objective of price stability is best  served by a fully independent institution with a 
precisely defined mandate. It is of utmost importance to design an institutional structure that separates monetary policy from the influence of short-term political interests.  
2.2 The ECB reiterates its previous observations re garding frequent amendments to the MNB Law. In 
the context of central bank independence, the cen tral bank legal framework needs to provide a 
stable basis for the central bank’s functioning. The appointment procedure for Monetary Council 
members, as well as the MNB’s decision-making bodies’  salary structure, was subject to several 
recent amendments without consulting these bodies or taking the MNB’s functional needs or the 
prevailing economic environment into account. These frequent changes to the MNB Law are 
incompatible with the principle of legal certaint y. They have already significantly impacted the 
                                                 
4  See CON/2007/14, CON/2008/83 and CON/ 2010/91. All ECB opinions and report s are published on the ECB’s website 
at www.ecb.europa.eu. 
ECB-P UBLIC  
4 MNB’s organisational and governance stability5, as will the planned increase in the number of 
members of decision-making bodies.  
2.3 The ECB understands that the new Constitutiona l framework justifies a recast of the MNB Law, 
and would welcome a recast that results in a long- term stable basis for central banking in Hungary.  
2.4  Some central bank and monetary financing prohibition issues in the ECB’s December 2006 and 
May 2010 Convergence Reports are still not addressed. 
2.5  The ECB has learned that the version of the draft law submitted to the Government contains 
substantive amendments compared to the version submitted to the ECB, in particular as regards 
macroprudential and remuneration policy matters. The ECB reiterat es its position that it should be 
re-consulted if there are substantive amendments pr oposed to the draft law at  a stage when the ECB 
has not yet adopted its opinion. In such situa tions, the ECB expects the consulting authority to 
submit the amended draft legislative provision to it as soon as possible, so that the opinion can be based on the most recent text. The ECB would appreciate the Ministry for the National Economy giving due consideration to honouring its obligation to consult the ECB in the future. 
 3. Subscription to the ECB’s capital Article 63 of the draft law prohibits the MNB fro m holding shares in any domestic or international 
organisation apart from shares in organisations se t up in relation to its activity. The ECB seeks 
clarification that this provision will not impede th e MNB’s ability to pay its contribution to the ECB’s 
capital.  
 4. Establishment of the balance sheet and the decision on the payment of dividends The ECB notes the transfer of these functions fro m the shareholder to the Executive Board. The 
affirmative decision by the shareholder in Article 43(2) of the draft law leaves room for doubts over whether profit distribution decision will continue to be subject to the shareholder’s resolution
6. Hence, 
this provision in conjunction with Article 49(4) and Article 64 of the draft law should be clarified.  
 5. The number of Monetary Council members and decision-making 5.1  Against the backdrop of constant changes in the composition of the MNB’s decision-making 
bodies, the increase in the number of Monetary Coun cil members, together with the possibility of 
increasing the number of deputy gove rnors - without due justification for the need to amend the 
MNB’s institutional framework - gives rise to concer ns whether this could be used to influence the 
decision-making process to the detrimen t of central bank independence.  
                                                 
5  See CON/2007/14 and CON/2008/83. 
6  See also ECB Convergence Report May 2010, p. 249. 
ECB-P UBLIC  
5 5.2  Apart from the prohibited employment relationships specified under the conflict of interest rules in 
the draft law, members of the Monetary Council may also have employment relationships other 
than their membership in the Monetary Council.  The draft law provides that, following 1 January 
2012, all decisions in connection with MNB tasks previously not taken by the Monetary Council 
will have to be discussed and decided by the Mone tary Council. To provide for a smooth transition 
in the decision-making process, and to ensure the MNB’s operational continuity, the ECB would 
welcome implementation of the changes in th e decision-making process to ensure a smooth 
handover of decision-making to the Monetary Counc il. A transitional period would appropriately 
address this. 
 6. Governor’s reporting obligations 
The Governor will be subject to an exceptional repor ting obligation at the request of the Speaker of the 
Hungarian Parliament or the Chair of the Parlia mentary Committee for Economic Affairs. The dialogue 
between national central banks (NCBs) and third parti es, even when based on statutory obligations to 
provide information and exchange views, is compa tible with central bank independence provided that: 
(i) it does not result in interference with the inde pendence of the members of the NCB’s decision-
making bodies;  
(ii) the special status of Governors in their capacity as members of th e ECB’s General Council is fully 
respected; and  
(iii) confidentiality requirements resulting from the Stat ute of the European System of Central Banks 
and of the European Central Bank (hereinafter ‘Statute of the ESCB’) are observed
7.  
The ECB understands that such reporting respects the limits of central bank independence set out in the 
Convergence Report and that it will concern the MNB’s activities and monetary policy. The ECB 
recommends clarifying in this sense the scope of the reporting.  
The purpose of the obligation to forward the agenda  of the meetings of the Executive Board to the 
Government8 is unclear. The representative of the Gove rnment participates without voting rights in 
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.  
 7.  MNB role in macroprudential supervision  
7.1  The ECB welcomes the MNB’s new macroprudentia l mandate to identify, monitor and assess risks 
to financial stability and take on macroprudential policy in Hungary. Central banks are natural 
candidates to be assigned a formal macroprudentia l mandate, given the potential synergies with 
                                                 
7 See Convergence Report May 2010, p. 19. 
8  See Article 34(1) of the draft law. 
ECB-P UBLIC  
6 traditional central bank functions relating to pr omoting financial stability. Furthermore, 
independence - which is an essential element in central banking - is also a necessary precondition 
for macroprudential supervision. However, th e draft law should ensure that the MNB’s 
macroprudential mandate does not interfere with th e orderly 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. 
7.2  The MNB needs to be equipped with tools and power s to efficiently fulfil the tasks attributed to it. 
In this respect, the ECB notes th at the only tool mentioned in the draft law is the adoption of a 
decree by the Governor ‘to prevent the build-up of  system risks or reduce such risks in areas not 
regulated in law or government decrees’. 
7.3  The ECB also notes that, as the general rules a llow the MNB to collect data in the central banking 
information system, these provisions of the draf t law would enable the MNB to collect data 
specifically in respect of its macroprudential mandate. In this respect, it is of crucial importance, if 
the MNB is to effectively fulfil its new macr oprudential 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. 
 8. Changes in the salary structure - financial and personal independence 
The ECB’s Convergence Reports in 2008 and 2010, and several ECB opinions
9 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 th e tasks conferred on it by the Treaty, the Statute 
of the ESCB and national legislation. Furthermore, an NCB may not be put into a position where it has 
limited or no control over its staff, or where a Memb er 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 Hunga rian authorities must ensure that any amendment 
to the legislation on the remuneration of the MNB’s st aff is decided in close cooperation with the MNB, 
taking due account of the MNB’s views10 regarding the impact of such legislative amendments on its 
ongoing ability to carry out its tasks. The ECB notes th at the recent amendments to the legislation 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 financia l independence addressed in previous opinions11.  
                                                 
9  ECB Opinions CON/2008/9, C ON/2009/45, CON/2009/47, C ON/2010/42, CON/2010/51 and CON/2010/56. All ECB 
opinions are available on the ECB’s website at www.ecb.europa.eu. 
10  See for example paragraph 4.3 of ECB Opinion CON/2010/42 and Opinion CON/2010/56. 
11  See CON/2010/56 and CON/2010/91.  
ECB-P UBLIC  
7 Against this background, the MNB should be effectively involved in drawing up the relevant parts of the 
draft law so as to safeguard the principle of central bank independence.  
 9. Prohibition on monetary financing 9.1  The draft law aims to mirror Union provisions on the prohibition of monetary financing. It provides 
that Article 123 of the Treaty – having rega rd to Council Regulation (EC) No 3603/93 of 
13 December 1993 specifying definitions for the a pplication of the prohibitions referred to in 
Articles 104 and 104(b)(1) of the Treaty - is authoritative in MNB’s financing of the public sector
12. The ECB understands that this general provision seeks to state that Article 123 of the 
Treaty and Regulation (EC) No 3603/93 are applicable to the MNB, addressing some of the defects highlighted in the ECB’s Convergence Report in  relation to the prohibition on monetary 
financing
13. The ECB welcomes these changes. However, in general, it is unnecessary to refer to 
Article 123 of the Treaty or Regulation (EC) No  3603/93 in national legislation as they are both 
directly applicable. If, nevertheless, national le gislative provisions refer to them, they may not 
change the scope of application of  the monetary financing prohibition14. Hence, the wording of 
Article 15 of the draft law must ensure that financing of the public sector is, as a rule, prohibited pursuant to Article 123 Treaty and Regulation No 3603/93.  
9.2  The draft law
15 refers to activities to be carried out as an  agent of the State. Article 21.2 of the 
Statute of the ESCB provides that the national cen tral banks may act as fiscal agents. However, 
they should comply with the monetary financ ing prohibition, so that such services may not 
constitute central bank financing of public sector oblig ations vis-à-vis third parties or credit to the 
public sector, outside the narrowly defined excepti ons specified in Regulation (EC) No 3603/93. 
Against this background, the ECB believes that the tasks assigned to the MNB under the draft law 
will be performed in compliance with the prohibiti on on monetary financin g in Article 123 of the 
Treaty and Regulation (EC) No 3603/93. 
9.3 The ECB understands that the draft law also re fers to possible financing by the MNB of the 
national deposit guarantee scheme. The only compatib le forms of central bank financing of deposit 
guarantee schemes are: (a) intraday credit in line with the general rules on provision of such credit 
by the central bank, and (b) short-term emerge ncy liquidity financing under strict conditions 
established in the ECB’s Convergence Reports, i.e. if  such funding is short term, addresses urgent 
situations, systemic stability aspects are at stake and decisions are at the NCB’s discretion. These 
conditions need to be listed in national law in th e cases where emergency liquidity financing of the 
deposit guarantee system is foreseen by the national legal system. Article 13 of the draft law refers 
to the possibility for MNB to provide a loan to the National Deposit Insurance Fund, subject to the 
                                                 
12  See Article 15 of the draft law. 
13  See e.g. the ECB’s Convergence Report of May 2010, pp. 249-250. 
14  See the ECB’s Convergence Report of May 2010, p. 24. 
15  See in particular Articles 17 and 18 of the draft law. 
ECB-P UBLIC  
8 prohibition on monetary financing, in urgent and exceptional cases that threat en the stability of the 
financial system as a whole, and the smooth comple tion of cash transactions, the due date of which 
loan may not be greater than three months. It is understood that these conditions are intended to ensure compliance with the monetary financing prohi bition. In this respect, the condition that loans 
are granted at the full discretion of the MNB would in particular need to be included in the draft law. When exercising its discretion to grant a loan , the MNB has to ensure that by doing so it is de 
facto  not taking over a State task. The ECB also notes that the issue of monetary financing 
compliance may require closer scrutiny in circum stances where the facilities are extended for more 
than one-a-half months. Moreover, it may be useful to specify that such loans are extended against 
adequate collateral, thus introducing an additiona l safeguard which should minimise the possibility 
of the MNB suffering any loss. 
 10. Central banking information system The draft law
16 indicates that even without a request by the Hungarian Central Statistics Office (CSO) 
MNB is automatically obliged to hand over regularly all individual data available in its statistical 
information system to the CSO. This rule should be formulated more precisely to clarify that the MNB is 
only obliged to hand over individual data to th e CSO on request. The ECB understands that the good 
practice of the exchange of data between the two in stitutions has been working well for several years and 
is already covered by the MNB Law currently in force.  
The rules on code generation used for anonymised data need clarification. Article 21(6) and (13) of the 
draft law contains contradictory provisions on the dead line for the destruction of the linking codes used in 
handling anonymised data.  
 11. Compatibility with the Treaties and the Statute of the ESCB 11.1 Personal independence - right of judicial review 
Pursuant to Article 46(12) of the draft law, an action may be brought befo re the Labour Court by a 
dismissed Monetary Council member in accordan ce with the Labour Code. Article 47(5) of the 
draft provides the same for the Governor. The E CB would welcome clarification that the Labour 
Court’s jurisdiction under the draft law is without prejudice to that of the Court of Justice of the European Union under Article 14.2 of the Statute of the ESCB.  
11.2 Institutional independence 
Article 1 of the draft law specifies that the MNB,  and members of its bodies, when executing their 
duties and fulfilling their obligations, should be independent, and may neither request nor take 
instructions from the Government, the Union ins titutions, bodies or offices,  with the exception of 
                                                 
16  See Article 21(3) of the draft law. 
ECB-P UBLIC  
9 the ECB, nor from other Member States’ governments or any other organisation or political party. 
Full respect of central bank independence in Article  130 of the Treaty and Article 7 of the Statute 
of the ESCB requires a prohibition on government inst ructions to the central bank or any member 
of its decision-making bodies, as well as on seek ing to influence the members of the MNB’s 
decision-making bodies in the performance of their task s. This should be clarified in the draft law. 
 12. The Governor’s role as a member of the Budgetary Council The ECB considers that the provisions of the draft law governing the role of the MNB’s Governor as a 
member of the Budgetary Council conflict with the pr ovisions governing the operations of the Budgetary 
Council
17. According to the draft law, the MNB’s Gove rnor represents the MNB for the budget proposal 
in the Budgetary Council, while the provisions govern ing the operations of the Budgetary Council require 
a distinction between the tasks fulfilled by the MNB’ s Governor acting as Governor and as a member of 
the Budgetary Council. Therefore, the draft law need s to be amended to avoid any conflict with the 
provisions of the law governing the ope rations of the Budgetary Council. 
 13. Legal integration of the MNB into the Eurosystem Hungary is a Member State with a derogation and must  therefore comply with all adaptation requirements 
under the Treaty. The Hungarian authorities should take this opportunity offered by the recast to make the 
necessary adjustments to ensure the MNB’s full integration into the Euro system when Hungary adopts the 
euro. The draft law should be adapted to comply w ith Article 127(1) of the Treaty by reflecting the 
central bank’s secondary objective of supporting the general economic policies of the Union and its 
obligation to comply with the Eurosystem’s regime  on financial reporting of NCB operations. Similarly, 
express recognition of the ECB’s powers in the fi elds of monetary policy and monetary policy 
instruments, collecting statistics, managing fore ign reserves, payment systems, issuing banknotes, 
cooperating with international money institutions under  Article 6 of the Statute of the ESCB, imposing 
sanctions, setting an exchange rate policy and appointing the MNB’s auditors, including the powers of the 
Council of the European in this respect, would be necessary
. 
 This opinion will be published on the ECB’s website.  
 
Done at Frankfurt am Main, 14 December 2011. 
[signed] 
The President of the ECB 
Mario DRAGHI 
                                                 
17   Law LXXV of 2008 on cost-efficient Stat e management and fiscal responsibility.