EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 13 December 2010 
on the appointment and dismissal of Monetary  Council members and the remuneration of the 
members of the Magyar Nemzeti Bank's Supervisory Board  
(CON/2010/91) 
 Introduction and legal basis
 
On 22 November 2010, the European Central Ba nk (ECB) received a request from the Hungarian 
Ministry of the National Economy for an opini on on a draft law amending the Law on the Magyar 
Nemzeti Bank (hereinafter the ‘Law on the MNB’) w ith regards to the appointment and dismissal of 
Monetary Council members of the Magyar Nemzeti Bank (MNB) (hereinafter the ‘draft law concerning 
the Monetary Council’). On 29 November 2010, the E CB received another request from the Ministry for 
an opinion on a draft law amending the Law on the MN B with regard to the remuneration of the MNB’s 
Supervisory Board members (hereinafter the ‘draft law concerning the Supervisory Board’) (hereinafter 
collectively referred to as the ‘draft laws’). The E CB has merged the two consultations as suggested by 
the consulting authority. 
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 provisions1, as the draft laws relate to the MNB. In accordance with the first sentence of 
Article 17.5 of the Rules of Procedure of the Euro pean Central Bank, the Governing Council has adopted 
this opinion. 
 1.  Purpose of the draft laws  1.1 The draft law concerning the Monetary Council 
 The draft law concerning the Monetary Counc il will amend the applicable appointment and 
dismissal procedure of some of its members. In ad dition, it contains provisions on the oath taken by 
Monetary Council members and the appeal procedure in the event of their dismissal. According to 
the Law on the MNB, the Monetary Council is th e MNB’s ultimate decision-making body in 
respect of certain tasks described in the Law on the MNB
2. The Monetary Council consists of five 
                                                 
1  OJ L 189, 3.7.1998, p. 42. 
2  These task comprise the definition a nd implementation of monetary policy and certain related tasks such as: issuing 
banknotes and coins ; holding and managing official reserv es in foreign exchange and gold ; conducting foreign exchange 
operations in relation to the management of foreign exchange reserves and the implementation of exchange rate policy ; 
developing the payment and settlement systems ; collecting and publishing the statistic al information required for carrying 
2 to seven members, i.e. the MNB’s Governor , as the Chairman, and Deputy Governors, and  up to 
four other members elected by the President of th e Hungarian Republic for a term of six years. The 
President is empowered to appoint and dismiss th e Governor and the Deputy Governors. Under the 
current regime the Governor and the Prime Minist er have equal powers to make proposals for the 
appointment and dismissal3 of the other members of the Monetary Council. However, under the 
draft law concerning the Monetary Council, the members other than the Governor and Deputy Governors would be elected and dismissed by the Parliament on the basis of a proposal from the Parliamentary Committee on the Economy and In formation Technology. According to the 
explanatory memorandum, the draft law concer ning the Monetary Council would end the 
involvement of the Governor and the Prime Minister in this procedure.  
1.2 The draft law concerning the Supervisory Board  
1.2.1 According to Article 52/A of the Law on the MNB, the MNB’s Supervisor y Board is responsible 
for the continuous supervision of the MNB on behalf of the State
4. The Supervisory Board’s 
competence does not extend to the supervision of t asks related to the European System of Central 
Banks (ESCB) and the impact of such tasks on the MNB’s profit and loss. The Supervisory Board prepares its reports in accordance with such rest rictions. The Supervisory Board members are the 
Chairman, members elected by Parliament, a Ministry representative and a consultant 
commissioned by the Minister for the National Economy. The remuneration of the Chairman and the other members of the Supervisory Board amounts to 15 % and 10 %, respectively, of the Governor’s remuneration received from the MNB. According to Article 53 of the Law on the MNB, the Governor’s monthly remuneration for the period from 1 March of a reference year to the 
end of February of the following year is ten times the national gross monthly average remuneration 
officially published by the Central Statistical O ffice for the year preceding the reference year.  
1.2.2 The draft law concerning the Supervisory Bo ard changes the rules on the remuneration of 
Supervisory Board members and will no longer tie their remuneration to the Governor’s 
remuneration. The Chairman will receive HUF 1 200 000 (approximately EUR 4 300) and the other 
members will receive HUF 800 000 (approximately EUR 2 900). According to the explanatory memorandum, this increase ensures that the remuneration of the Supervisory Board members will 
be proportionate to the quantity and quality of their work. 
 
                                                                                                                                                             
out its tasks ; and supporting the efficient developm ent and conduct of policies relating to the prudential supervision of 
credit institutions and the stability of the financial intermediary system. 
3  According to Article 49(11) of the Law on the MNB, the G overnor of the MNB submits a proposal to the President on 
the appointment or dismissal of two members, in consulta tion with the Prime Minister. The Prime Minister submits a 
proposal to the President on the appointment and dismissal of tw o further members, in consultation with the Governor of 
the MNB.  
4  According to the Law on the MNB, nomination for membersh ip of the Supervisory Board shall be open to Hungarian 
citizens who possess excellent professional knowledge on matters relating to credit institutions, financial and accounting 
disciplines and who are eligible to vote in Hungarian parliamentary elections. The mandate of the members of the 
Supervisory Board shall be for the duration of the mandate of Parliament and shall last until the expiry of the mandate of 
Parliament. The Supervisory Board remains in office until a new Parliament elects the ne w Supervisory Board members 
within three months from the Parliament’s  first convening. Members of the Superv isory Board shall be obliged to report 
to the Parliament responsible for their election or to the Minister responsible for their appointment. 
3 2. General observations 
2.1 As mentioned in previous ECB Opinions5, 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 fo rms the basis for this 
monetary policy credibility. The Treaty’s require ment of 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 mandate. It is therefore of utmost importance to design an institutional structure that separates m onetary policy from the influence of short-term 
political interests.  
2.2 The ECB reiterates and would like to emphasise its previous comments regarding the frequent 
amendments to the Law on the MNB. One cons ideration in the context of central bank 
independence is the need for a central bank legal framework that provides a stable basis for the 
central bank’s functioning. The ECB notes that the appointment procedure applicable to Monetary Council members has been often amended in the past and that the Law on the MNB has been 
amended several times this year (with furthe r amendments envisaged), and finds that the 
introduction of such frequent changes adversel y affect MNB’s organisational and governance 
stability
6.  
2.3 The ECB is closely following the recent legisla tive developments in Hungary. The combination of 
the changes to the remuneration of the members of the decision-making body of the MNB and to 
the competences of the Governor, i.e. the power to propose the appointment and dismissal of two members of the Monetary Council, under the dr aft laws or under recently adopted legislation
7, with 
the repeated criticism expressed in  the recent past by the Government concerning interest rate 
decisions taken by the MNB raises concerns, as this could be seen as the Government trying to 
influence the Governor in the performance of his t asks. As the ECB has consistently noted in its 
Convergence Reports, any such influence would be  contrary to Article 130 of the Treaty which 
requires governments of the Members States to resp ect the principle of central bank independence 
and not to seek to influence the members of the decision-making bodies of the national central 
banks (NCBs) in the performance of their tasks8.   
2.4  The MNB’s financial independence  and the  personal independence  of the members of the MNB’s 
decision-making body are still matters of concern.  The ECB notes the disregard by the Hungarian 
Parliament of the ECB’s stance on the provi sions of the Law on the MNB regarding the 
remuneration of the members of MNB’s governing body9. It further notes that the present draft 
laws still do not address all the issues highlighted in the ECB’s Convergence Reports from 
                                                 
5  See CON/2007/14 and CON/2008/83. All ECB opinions are published on the ECB’s website at www.ecb.europa.eu. 
6  See CON/2007/14, CON/2008/83. 
7   See CON/2010/56. 
8  See for example the ECB’s Convergence Report 2010, p. 15. 
9  See CON/2010/56.  
4 December 2006 and May 2010 and, in particular, the deficiencies with regard to the independence 
of the central bank and the prohibition of monetary financing. 
2.5 The ECB would also like to remind the Hungari an authorities that according to the Law on the 
MNB, the MNB is to be consulted on draft decisions  and legislative provisions related to the tasks 
of the MNB. According to the E CB’s information, the Hungarian authorities failed to comply with 
this obligation not only with regard to the draf t law concerning the Supervisory Board, but also 
with regard to other legislative provisions (including the budget proposal for 2011). 
 3. Specific observations regarding the draft law concerning the Monetary Council 
3.1 The ECB limits its observations to the compa tibility of the draft law concerning the Monetary 
Council with the requirements for personal indepe ndence of the members of an NCBs’ decision-
making bodies under Article 14.2 of the Statute of the European System of Central Banks and of 
the European Central Bank (hereinafter the ‘Statu te of the ESCB’). Under the draft law concerning 
the Monetary Council, the criteria for the appoi ntment of Monetary Council members remain 
unchanged
10 as do the rules guaranteeing member’s pe rsonal independence as regards the security 
of tenure of office, grounds for dismissal and conflic ts of interest. The term of office of Monetary 
Council members is six years and their mandate terminates upon:  expiration of their term of office;  
resignation; dismissal; or death. The President may dismiss the Governor and Deputy Governors, 
while Parliament, on the basis of a proposal from the Parliamentary Committee on the Economy 
and Information Technology, may dismiss other Monetary Council members. A Monetary Council 
member’s mandate may only be terminated by dismissal if the member no longer fulfils the 
conditions required for the performance of thei r duties or has been found guilty of serious 
misconduct. 
3.2 The ECB understands that the mandate of the curre nt members of the Monetary Council (other than 
the Governor and Deputy Governor s) will expire on 28 February 2011 and that the appointment of 
new Monetary Council members is necessary to en sure the smooth functioning of the Monetary 
Council. In order to safeguard the institutiona l independence of the MNB, the Law on the MNB 
should clearly provide for the procedures to replace the Governor in the event of the Governor’s termination due to expiration of the term of office,  resignation, dismissal or death so as to avoid 
any external ad-hoc interference and, at the same time, ensure the smooth and continuous 
functioning of the Monetary Coun cil. Any person who takes over th e duties of the Governor should 
benefit from the same safeguards of personal inde pendence, i.e. the same rules applying to the 
current Governor
11 on security of tenure of office, grounds fo r dismissal and conflicts of interest.  
3.3 As regards the draft provisions on the oath to be  taken by Monetary Council members, the oath is 
taken in front of the President by the Gover nor and Deputy Governors and in front of the 
                                                 
10  Monetary Council members shall be H ungarian citizens with outstanding theoreti cal knowledge and/or experience related 
to monetary, financial and/or credit institution activities. 
11  Similarly, see CON/ 2010/37, paragraph 2.1. 
5 Parliament by the other members. As noted in the ECB’s Convergence Report of 2010, the Law on 
the MNB refers to a separate law that specifies th e wording of the oath. The wording of the oath 
should be adapted in order not to hinder the G overnor and the other members of the Monetary 
Council from performing ESCB-related tasks. 
 4. Specific observations regarding the draft law concerning the Supervisory Board 
4.1 The ECB would like to remind the consulting aut hority that on 1 July 2010, the ECB received a 
request for an opinion on a draft law that intended to introduce a HUF 2 000 000 (approximately EUR 7 300) cap on the Governor’s remuneration. According to the explanatory memorandum, the 
proposed measure was aimed at allowing a mo re performance-based and equitable income 
distribution in the public sector and at strengthening the public administration’s efficiency. The proposed cap represented a reduction of approximate ly 75% in the Governor’s remuneration and 
indirectly in the remuneration of the Deputy Governors, members of the Monetary Council and of the Supervisory Board as their remuneration was based on the Governor’s remuneration. The Law 
was adopted on 22 July 2010 and published on 13 August 2010
12 (hereinafter the ‘Law limiting the 
Governor’s remuneration’).  The relevant provision of the Law limiting the Governor’s 
remuneration disregarded the ECB’s legal position and did not comply with the ECB’s Opinion, 
which required involving the MNB in the legisl ative process and ensuring that the security of 
tenure of the current Monetary Council members wa s not affected. The salary cap became effective 
in September 2010.  
4.2 The new members of the Supervisory Board were  appointed in the second half of November 2010. 
Under the draft law concerning the Supervisor y Board, remuneration of Supervisory Board 
members is no longer tied to the Governor’s remuneration. On the basis of the available 
information13, the ECB understands that pursuant to this provision, the Government intends to raise 
the new Supervisory Board members’ remuneration to  the level existing prior to the introduction of 
the Law limiting the Governor’s remuneration a nd that the new Supervisory Board members will 
fall under the Law limiting the Governor’s re muneration for only a short period of time. 
4.3 Formally, the proposed provisions regarding the Supervisory Board members’ remuneration 
comply with the Treaty and the Statute of the ES CB. Practically, if the draft law concerning the 
Supervisory Board is adopted in its current form, the MNB will face a situation where the increased 
remuneration of the Supervisory Board members w ill exceed the remuneration of certain Monetary 
Council members, which was recently reduced. The explanatory memorandum to the draft law 
concerning the Supervisory Board explains that  the salary increase is based on proportionality 
between the quantity and quality of work. Against th is background (see paragr aphs 4.1, 4.2 and this 
                                                 
12  Law XC of 2010 on the adoption and amendment of certain economic and financial legal acts. 
13 The Governor’s remuneration before the cut amounted to approximately HUF 8 000 000 (approximately EUR 29 100). 
The Chairman’s and the other members of the Supervisory Board remuneration was set out as 15 % and 10 % of the 
Governor’s remuneration, amounti ng to approximately HUF 1 200 000 (approximately EUR 4 300) and 800 000 
(approximately EUR 2 900), respectively.  
6 paragraph), the recent amendment to the Law on MNB with regard to the remuneration of the 
Governor and members the Monetary Council and Supervisory Board - compared to the proposed 
increase of the remuneration of only the Supervisor y Board members - raises concerns that pressure 
is being placed on the current Governor and th e members of the MNB’s decision making body who 
are involved in the performance of ESCB-related t asks which would be inconsistent with central 
bank independence (see also paragraph 2.3).  
4.4  In the same spirit, the current economic situa tion and the announced intention of the Government to 
reduce remuneration in the public sector, such as in case of the Governor and the other members of the Monetary Council, raises doubts as to whethe r the increase in the remuneration of the new 
Supervisory Board members has been timed properly. 
 This opinion will be published on the ECB’s website.    Done at Frankfurt am Main, 13 December 2010. 
 
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET