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)

Date: 2010-12-13
Institutions: European Central Bank
Subjects: Hungary, appointment of staff, central bank, dismissal, national law, remuneration of work

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  Bank  (ECB)  received  a  request  from  the  Hungarian 

Ministry  of  the  National  Economy  for  an  opinion  on  a  draft  law  amending  the  Law  on  the  Magyar 

Nemzeti  Bank  (hereinafter  the  ‘Law  on  the  MNB’)  with  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 ECB received another request from the Ministry for 

an opinion on a draft law amending the Law on the MNB 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 ECB 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  Central  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 European 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  Council  will  amend  the  applicable  appointment  and 

dismissal procedure of some of its members. In addition, 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  the  MNB’s  ultimate  decision-making  body  in 
respect of certain tasks described in the Law on the MNB2. The Monetary Council consists of five 

1  
2  

OJ L 189, 3.7.1998, p. 42. 
These  task  comprise  the  definition  and  implementation  of  monetary  policy  and  certain  related  tasks  such  as:  issuing 
banknotes and coins; holding and managing official reserves 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 statistical information required for carrying 

 
 
 
 
 
                                                 
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 the Hungarian Republic for a term of six years. The 

President is empowered to appoint and dismiss the Governor and the Deputy Governors. Under the 

current regime the Governor and the Prime Minister 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  Information  Technology.  According  to  the 

explanatory  memorandum,  the  draft  law  concerning  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 Supervisory Board is responsible 
for  the  continuous  supervision  of  the  MNB  on  behalf  of  the  State4.  The  Supervisory  Board’s 

competence does not extend to the supervision of tasks 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 restrictions. 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 Office for the year preceding the reference year.  

1.2.2  The  draft  law  concerning  the  Supervisory  Board  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. 

3  

4  

out its tasks; and supporting the efficient development and conduct of policies relating to the prudential supervision of 
credit institutions and the stability of the financial intermediary system. 
According to Article 49(11) of the Law on the MNB, the Governor of the MNB submits a proposal to the President on 
the  appointment  or  dismissal  of  two  members,  in  consultation  with  the  Prime  Minister.  The  Prime  Minister  submits  a 
proposal to the President on the appointment and dismissal of two further members, in consultation with the Governor of 
the MNB.  
According to the Law on the MNB, nomination for  membership 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 new Supervisory Board members 
within three months from the Parliament’s first convening. Members of the Supervisory Board shall be obliged to report 
to the Parliament responsible for their election or to the Minister responsible for their appointment. 

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2. 

General observations 

2.1  As  mentioned  in  previous  ECB  Opinions5,  a  credible  monetary  policy  is  a  key  condition  for 

controlling  inflationary  expectations  and  promoting  sustainable  convergence  towards  price 

stability. An independent central bank in a stable institutional environment forms the basis for this 

monetary  policy  credibility.  The  Treaty’s  requirement  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  monetary  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  consideration  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  further  amendments  envisaged),  and  finds  that  the 

introduction  of  such  frequent  changes  adversely  affect  MNB’s  organisational  and  governance 
stability6.  

2.3  The ECB is closely following the recent legislative 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 draft laws or under recently adopted legislation7, 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  tasks.  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 respect 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  provisions  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  
6  
7   
8  
9  

See CON/2007/14 and CON/2008/83. All ECB opinions are published on the ECB’s website at www.ecb.europa.eu. 
See CON/2007/14, CON/2008/83. 
See CON/2010/56. 
See for example the ECB’s Convergence Report 2010, p. 15. 
See CON/2010/56.  

3 

                                                 
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  Hungarian  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 ECB’s information, the Hungarian authorities failed to comply with 

this  obligation  not  only  with  regard  to  the  draft  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  compatibility  of  the  draft  law  concerning  the  Monetary 

Council with the requirements for personal independence 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 ‘Statute of the ESCB’). Under the draft law concerning 

the  Monetary  Council,  the  criteria  for  the  appointment  of  Monetary  Council  members  remain 
unchanged10 as do the rules guaranteeing member’s personal independence as regards the security 

of tenure of office, grounds for dismissal and conflicts 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  their  duties  or  has  been  found  guilty  of  serious 

misconduct. 

3.2  The ECB understands that the mandate of the current members of the Monetary Council (other than 

the Governor and Deputy Governors) will expire on 28 February 2011 and that the appointment of 

new  Monetary  Council  members  is  necessary  to  ensure  the  smooth  functioning  of  the  Monetary 

Council.  In  order  to  safeguard  the  institutional  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 Council. Any person who takes over the duties of the Governor should 

benefit  from  the  same  safeguards  of  personal  independence,  i.e.  the  same  rules  applying  to  the 
current Governor11 on security of tenure of office, grounds for 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  Governor  and  Deputy  Governors  and  in  front  of  the 

10   Monetary Council members shall be Hungarian citizens with outstanding theoretical knowledge and/or experience related 

to monetary, financial and/or credit institution activities. 
Similarly, see CON/2010/37, paragraph 2.1. 

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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 the wording of the oath. The wording of the oath 

should  be  adapted  in  order  not  to  hinder  the  Governor  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 authority 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  more  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  approximately  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 201012 (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  legislative  process  and  ensuring  that  the  security  of 

tenure of the current Monetary Council members was 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  Supervisory  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 and that the new Supervisory Board members will 

fall under the Law limiting the Governor’s remuneration 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  ESCB.  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 will 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 this background (see paragraphs 4.1, 4.2 and this 

12  
13 

Law XC of 2010 on the adoption and amendment of certain economic and financial legal acts. 
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,  amounting  to  approximately  HUF  1  200  000  (approximately  EUR  4  300)  and  800  000 
(approximately EUR 2 900), respectively.  

5 

 
                                                 
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 Supervisory Board members - raises concerns that pressure 

is being placed on the current Governor and the members of the MNB’s decision making body who 

are  involved  in  the  performance  of  ESCB-related  tasks  which  would  be  inconsistent  with  central 

bank independence (see also paragraph 2.3).  

4.4  

In the same spirit, the current economic situation 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  whether  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 

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