Opinion of the European Central Bank of 22 December 2011 on the Magyar Nemzeti Bank’s independence (CON/2011/106)
Date: 2011-12-22
Institutions: European Central Bank
Subjects: Hungary, central bank, institutional activity, national law, pay, staff

EN 

ECB-PUBLIC 

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 (ECB) 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 the 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 have been tabled in the meantime, which it has not yet 
received. This opinion is based on the latest version of this law1 (hereinafter the ‘revised draft law’). 

Furthermore,  the  ECB  has  also  learned  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  Authority  (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  Central  Bank  by  national  authorities  regarding  draft 
legislative  provisions3,  as  the  revised  draft  law  and  the  draft  constitutional  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 adopted this opinion, which is as regards 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 Parliament contains substantive amendments compared 

to the version submitted to the ECB on 2 November 2011, in particular as regards macroprudential and 

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3 

Draft law T/5248 on the Magyar Nemzeti Bank, together with the following proposed amendments:  5248/4, 5248/5 
5005/54 – proposed amendment to draft law T/5005 on the Transitional Measures to the Basic Law of Hungary. 
OJ L 189, 3.7.1998, p. 42. 

 
 
 
 
                                                 
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remuneration  policy.  It  introduces  a  general  delegation  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  draft  law,  but  the  tabled  amendments  reinstated 

them. A deletion of the general cap on the remuneration of employees below management level is tabled; 

however, no amendments are proposed to the remuneration of the Governor, the Deputy Governors and 

the Supervisory Board members. 

The draft constitutional law enables a merger between the MNB and the FSA and allows their respective 

powers  to  be  transferred  to  a  newly  created  legal  successor  of  both  institutions.  At  the  same  time,  the 

MNB’s  Governor  and  the  FSA’s  President  will  become  Vice-Presidents,  under  the  authority  of  a  new 

president to be appointed by the President of Hungary. 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  draft  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  particular  urgency  do  not  relieve  national  authorities 

from  their  duty  to  consult  the  ECB  and  to  allow  sufficient  time  to  take  into  account  its  views  in 

accordance with Decision 98/415/EC. Any substantive amendments to a draft law have to be submitted to 

the ECB to allow it to adopt an opinion on the most recent legislative text and the process of adoption of 

the draft law should be suspended. The ECB’s observations 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 National Economy giving due consideration to honouring 

its obligation to consult the ECB in the future 

3.   Draft constitutional law - proposed merger of the MNB with the FSA 

The draft constitutional law amends the Constitution and allows the MNB to be merged with the FSA into 

a  new  institution.  The  ECB  understands  that  the  new  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 implemented is crucial, and this is not clear from the draft 

constitutional law.  

In particular, the new institution should be fully independent with a precise definition of its mandate in 

compliance with the central bank independence principle, including functional, institutional, financial and 

personal independence, and with the role of the central bank as part of the ESCB. The new institution’s 

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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  management  of  the  new  institution’s  financial  and  human 

resources must comply with central bank financial independence. Moreover, in order to comply with the 

monetary  financing  prohibition,  the  national  central  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  independence  of  the  MNB’s 

Governor in office. By appointing a new president with 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 would 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 law establishing the new institution in good time to allow 

the Hungarian authorities to take the ECB’s opinion into account in the legislative 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 Opinion 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.  Against  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 – gives rise to concerns whether this could be used 

to influence the decision-making process to the detriment of central bank independence.  

Moreover,  the  revised  draft  law  needs  to  provide  for  a  smooth  transition  in  the  decision-making 
process and to ensure the MNB’s operational continuity5. 

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  voting  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.  

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5  

6  

See ECB’s Convergence Report, May 2010, p. 25. 
See  paragraph  5.2  of  Opinion  CON/2011/104.  All  ECB  Opinions  are  available  on  the  ECB’s  website  at 
www.ecb.europa.eu. 
See Article 34(1) of the revised draft law. 

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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 legislation. 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 views8 regarding the impact of such 

legislative amendments on its ongoing ability to carry 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 independence addressed in previous opinions9. 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 macroprudential mandate to identify, monitor and assess 

risks to financial stability and take on macroprudential policy in Hungary had been deleted in one 

of the amendments re-submitted for consultation, but 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  supervision.  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  tool  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 

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9 

ECB Opinions CON/2008/9, CON/2009/45, CON/2009/47, CON/2010/42, CON/2010/51 and CON/2010/56.  
See for example paragraph 4.3 of ECB Opinion CON/2010/42 and Opinion CON/2010/56. 
See CON/2010/56 and CON/2010/91.  

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the  MNB  is  to  effectively  fulfil  its  new  macroprudential  mandate,  that  it  receives  in  a  timely 

manner  all  necessary  data  and  information,  including  information  specific  to  supervised 

institutions,  and  that  it  may  designate  –  in  cooperation  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 affirmative 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 resolutions10. Hence, this provision, in conjunction with 

Article 49(4) and Article 64 of the revised draft law, 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  Opinion  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 MNB11.  

4.7   Central banking information system 

The ECB notes that the revised draft law still lacks 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 destruction 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 Opinion CON/2011/104 on Hungary being a Member State 

with  a  derogation  and  therefore  obliged  to  comply  with  all  adaptation  requirements  under  the 

Treaties. 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  Eurosystem  when  Hungary 
adopts the euro13.  

This opinion will be published on the ECB’s website.  

Done at Frankfurt am Main, 22 December 2011. 

10  
11  
12  
13  

See also ECB Convergence Report May 2010, p. 249. 
See paragraph 9.3 of Opinion CON/2011/104. 
See paragraph 10 of Opinion CON/2011/104. 
For more detail, see paragraph 13 of Opinion CON/2011/104. 

5 

[signed] 

The President of the ECB 

Mario DRAGHI