Opinion of the European Central Bank of 7 October 2013 on the integrated Hungarian supervisory framework (CON/2013/71)
Date: 2013-10-07
Institutions: European Central Bank
Subjects: Hungary, banking supervision, central bank, financial stability, financial supervision, national law

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 7 October 2013 

on the integrated Hungarian supervisory framework 

(CON/2013/71) 

Introduction and legal basis 

On 24 August 2013, the European Central Bank (ECB) received a request from the Hungarian Ministry of 

National  Economy  (hereinafter the  ‘consulting  authority’)  for  an  opinion  on a new  draft  law amending 

several legal acts in the area of financial regulation (hereinafter the ‘draft law’) in connection with a Law 
CXXXIX  of  2013  on  the  Magyar  Nemzeti  Bank1  (hereinafter  referred  to  as  the  ‘new  Law  on  MNB’) 

facilitating  the  integration  of  the  Hungarian  Financial  Supervisory  Authority  (HFSA)  into  the  Magyar 

Nemzeti Bank (MNB). This consultation request is a follow-up to Opinion CON/2013/56 on the draft law 
replacing the Law on the Magyar Nemzeti Bank2.  

On  16  September  2013,  the  ECB  received  amendments  to  the  draft  law  from  the  consulting  authority. 

This  correspondence  also  contained  a  further  request  for  an  ECB  opinion  on  a  new  draft  government 

decree  (hereinafter  the  ‘draft  decree’)  amending  several  government  decrees  in  connection  with  the 

integration  of  the  HFSA  into  the  MNB.  Given  that  this  request  is  also  directly  connected  to  the  new 

integrated  supervisory  structure  in  Hungary,  the  ECB  has  decided  to  issue  a  joint  opinion  on  both 

consultation requests. 

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 and sixth  indents 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 draft law concerns the MNB and contains rules applicable to 

financial institutions insofar as they materially influence the stability of financial institutions and markets. 

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 law and the draft decree 

The  Hungarian  Parliament  has  adopted  new  legislation  changing  the  MNB’s  competence  and 

institutional  framework  by  establishing  a  new  legal  framework  for  integrated  supervision  of  the 

1  

2  
3  

The  newly  adopted  Law  CXXXIX  of  2013  on  the  MNB  has  been  published  in  Magyar  Közlöny  No.  158/2013, 
(26.9.2013). 
Law CCVIII of 2011. 
OJ L 189, 3.7.1998, p. 42. 

 
 
 
 
 
                                                           
ECB-PUBLIC 

Hungarian financial market as of 1 October 20134. The purpose of the draft law and the draft decree 

is to implement this change in other related legal acts. 

The HFSA is supervising credit institutions, capital markets, insurance markets and financial funds 

until 30 September 2013. The operational conduct of these functions is further defined in several 
Hungarian legal  acts. To  this  effect,  the  draft  law5  amends  57  Hungarian legal  acts  and the draft 

decree amends 50 government decrees in the area of financial regulation. Most of the amendments 

contained  in  the  draft  law  and  in  the  draft  decree  are  of  a  technical  nature,  as  the  aim  of  these 

legislative  changes  is  to  reflect  the  establishment  of  a  new  integrated  supervisory  structure  in 

Hungary by replacing the references to the HFSA and its competences with a reference to the MNB 

and  its  new  tasks  and  competences  in  various  legal  acts.  Moreover,  the  draft  law  repeals  certain 

secondary legal acts. 

2.   The appropriate time to consult the ECB 

On 24 August 2013, the ECB received the request from the consulting authority for an opinion on 

the  draft  law.  This  request  was  made  on  an  urgent  basis  with  reference  to  the  Hungarian 

Parliament’s schedule for discussing the draft law on 9 September 2013. 

On  30  August  2013,  the  Government  submitted  a  different  version  of  the  draft  law  to  the 
Parliament6,  but  this  version  was  not  sent  to  the  ECB.  Furthermore,  on  16  September  2013,  the 

consulting  authority  requested  the  ECB’s  opinion  on  amendments  made  to  the  draft  law.  The 

additional  request  for  an  opinion  on  the  draft  decree  similarly  stressed  the  urgency  of  a  quick 

response from the ECB due to the advanced stage of legislation. In view of the above, this opinion 

has been adopted in response to the consultation requests, and is based on the texts submitted to the 

ECB on 24 August and 16 September 2013. 

The draft law subject to this consultation was adopted on 23 September 2013 shortly after the ECB 

had been consulted on its amendments, but before it could adopt this opinion. The draft law was 
published shortly after its adoption as Law CXLIII of 20137. Similarly, the draft decree was also 
adopted, and published as Government Decree 345/2013 (IX. 30.)8. As a consequence, there was 

no possibility for the Hungarian legislator to take the ECB’s views into account before adopting the 

draft  law.  This  circumstance  rendered  the  request  for  the  ECB  adopting  its  opinion  in  an  urgent 

procedure obsolete.  

4  

5  

6  

7  
8  

For  the  ECB’s  opinion  on  this  proposal,  see  Opinion  CON/2013/56.  All  ECB  opinions  are  published  on  the  ECB’s 
website at www.ecb.europa.eu. 
Submitted to the ECB under the title ‘Proposal on the amendments of acts concerning the proposal on the Act of Central 
Bank of Hungary’. 
Draft  law  T/12018.  egyes  törvényeknek  a  Magyar  Nemzeti  Bankról  szóló törvénnyel  összefüggő,  valamint  egyéb  célú 
módosításáról, available at the Hungarian Parliament’s website. 
Published in Magyar Közlöny No. 159/2013 (27.9.2013). 
Published in Magyar Közlöny No. 160/2013 (30.9.2013.) 

2 

 
                                                           
ECB-PUBLIC 

With  respect  to  the  consultation  on  the  draft  law  and  the  draft  decree,  the  Hungarian  authorities 

have  not  complied  with  their  duty  to  consult  the  ECB.  The  adoption  of  this  opinion  in  no  way 

divests the Hungarian authorities of their duty to consult in compliance with this obligation, since 

this  duty  is  important  for  the  application  and  interpretation  of  the  enacted  laws  and  any  future 

amendments. 

The  ECB  reiterates  that,  in  accordance  with  Article  4  of  Decision  98/415/EC,  the  ECB  must  be 

consulted ‘at an appropriate stage’ in the legislative process, which implies that such consultation 

should  take  place  at  a  point  in  the  legislative  process  that  affords  the  ECB  sufficient  time  to 

examine  the  draft  legislative  provisions  and  adopt  its  opinion.  Following  from  the  wording  of 

Article 3(4) of Decision 98/415/EC, Member States are obliged to suspend the process of adoption 

of  draft  legislative  provisions  pending  submission  of  the  ECB’s  opinion  to  allow  the  relevant 

national authorities to meaningfully consider the ECB’s opinion prior to adoption of the provisions. 

In this respect, the ECB stresses that even in cases of particular urgency or where the legislation 

has reached an advanced stage, the national authorities are not relieved of their duty to consult the 

ECB at an appropriate stage in the legislative process that allows sufficient time for: (a) the ECB to 

examine the draft legislative provisions and adopt its opinion in all required language versions; and 

(b)  the  national  authorities  to  take  into  account  the  ECB’s  views  in  accordance  with  Decision 

98/415/EC. The  ECB  would  appreciate the  Ministry honouring  its obligation to  consult the  ECB 

line with the provisions of Decision 98/415/EC in the future. 

3. 

Coherence and legal certainty 

The  draft  law and the  draft  decree  replace the references to the  HFSA  and  its competences  by  a 

reference to the MNB and its new tasks and competences in various legal acts. In doing so, they 

fail  to  provide  an  adequate  level  of  legal  certainty,  since  they  refer  to  the  new  integrated 

supervisory  institutional  regime  using  both  ‘MNB’  and  ‘Supervisory  Authority’  and  provides 
clarification  only  in  certain  cases9.  In  the  interest  of  legal  certainty,  the  ECB  suggests  using  the 

single  term  ‘Supervisory  Authority’  in  all  amended  legal  acts  in  which  a  reference  to  the  new 

integrated supervisory institutional regime is intended. 

Furthermore,  Article  165  of  the  draft  law  still  contains  a  reference  to  the  HFSA,  which  is 

inconsistent  with  the  future  integrated  framework  of  financial  supervision  under  the  sole 

competence of the MNB. 

9  

See Articles 11, 39, 75, 104, 107, 113, 126, 133, 138, 145, 164 and 180 of the draft law. 

3 

 
 
 
 
                                                           
ECB-PUBLIC 

4. 

The proposed timeline for the effective restructuring of financial supervision in Hungary 

The  new  Law  on  the  MNB  provides  that  the  MNB  is  to  be  fully  functional  as  regards  its  new 
supervisory tasks on 1 October 201310. In this regard, the ECB noted in Opinion CON/2013/5611 

that the new Law on the MNB does not provide for a sufficient period of time between its adoption 

and  the  dissolution  of  the  HFSA,  which  is  also  the  date  on  which  the  MNB  shall  commence 

performing its new tasks. Most of the provisions of the draft law and the draft decree are also due 
to enter into force on 1 October 201312. 

The ECB wishes to reiterate that legal certainty would require a longer period of time between the 

adoption and application of the provisions of the draft law and the draft decree in order to enable 

the entities operating in the financial markets to bring their internal procedures into line with the 

new  structure  of  financial  supervision  in  Hungary,  thus  providing  for  greater  stability  within  the 

financial system. 

5. 

Central bank independence and supervisory independence 

5.1   During the current consultation procedure, the new Law on the MNB was adopted without taking 

into  account  all  the  ECB’s  observations  as  regards  the  MNB’s  independence;  therefore  concerns 

remain regarding compliance with the principle of central bank independence enshrined in Article 

130 of the Treaty. 

5.2   As regards the draft law, the Law on the HFSA currently empowers the HFSA President to adopt 

secondary  legislation  on  regulatory  matters  within  his  competence.  Following  the  transfer  of 

supervisory tasks from the HFSA to the MNB, the MNB, as general successor, will inherit these 

legislative  powers.  On  this  basis,  Article  183  of  the  draft  law  repeals  47  decrees  adopted  by  the 

HFSA President, including, inter alia, the decree on the payment, calculation and conditions for the 
supervisory fee13.  In Opinion CON/2013/56, the ECB  assumed that the HFSA President’s decree 

providing financing for the supervisory tasks will continue to apply after the transfer of supervisory 

tasks.  In  the  absence  of  such  continued  effect,  and  also  considering  the  above  observations 

concerning  the  timeline,  the  MNB  will  be  unable  to  raise  funds  from  the  supervised  entities  to 

cover the costs of its supervisory activities, at least temporarily until the adoption of relevant new 

financing  rules.  In  the  meantime,  the  MNB  will  therefore  be  obliged  to  finance  its  supervisory 

activities  from  existing  resources.  This  raises  serious  concerns  as  regards  the  MNB’s  financial 

independence. In Opinion CON/2013/56, the ECB highlighted that in order to guarantee the MNB’s  

financial  independence,  the  MNB  should  be  involved  in  determining  the  amount  of  financial 

contribution payable by supervised entities, and should also independently define the methods to be 

used to calculate such contributions, taking into account its actual costs. On the other hand, and in 

10  
11  
12  
13  

See Article 172 of the draft law. 
See paragraph 3.1.11 of CON/2013/56. 
See Article 181 of the draft law. 
See point 23 of Article 187. 

4 

 
                                                           
ECB-PUBLIC 

line with the principle of central bank independence, the MNB should be able to do this at its own 

pace and discretion, without ending up in a situation where it has insufficient financial resources to 

carry out its ESCB-related tasks. The principle of financial independence requires an NCB to have 

sufficient means to perform its ESCB-related tasks as well as its national tasks, including the tasks 

newly entrusted to the MNB. Therefore, the HFSA President’s decrees providing financing for the 

supervisory tasks should continue to apply after the transfer of supervisory tasks to the MNB. 

5.3   The  Core  Principles  for  Effective  Banking  Supervision  developed  by  the  Basel  Committee  on 
Banking  Supervision14  provide  that  ‘[t]he  supervisor  possesses  operational  independence, 

transparent processes, sound governance, budgetary processes that do not undermine autonomy and 
adequate resources, and is accountable for the discharge of its duties and use of its resources’15. 

The lacuna resulting from the general repeal of all legislation as of the effective date of the transfer 

of supervisory tasks from the HFSA to the MNB, would – in addition to causing legal uncertainty 

for supervised entities – affect the MNB’s ability to take independent supervisory decisions. 

The ECB considers that for reasons of legal certainty, unless these decrees become obsolete from 

an  operational  rather  than  an  institutional  point  of  view,  the  legislation  adopted  by  the  HFSA 

President  should  continue  to  apply  after  the  transfer  of  supervisory  tasks  from  the  HFSA  to  the 

MNB  until  the  MNB  is  ready  to  adopt  new  decrees  regulating  the  subject  matter  at  hand. 

Introducing a general clause into the draft law to this effect could eliminate the concerns outlined 

above. 

5.4   Moreover,  pursuant  to  Article  20  of  the  draft  law,  the  MNB  will  only  be  able  to  withdraw  the 

operating  licence  of  a  credit  institution  after  obtaining  the  approval  of  the  Minister  of  National 
Economy.  This  is  not  in  line  with  the  principle  of  supervisory  independence16.  This  should  be 

given due consideration when formulating the amendments to the specific legal acts reflecting the 

conduct of tasks and competences of the HFSA to be transferred to the MNB by the draft law. 

6. 

Division of macro-prudential competences between the Government and the MNB 

The  ECB  notes  that  the  new  law  on  the  MNB  assigns  the  fundamental  tasks  related  to  the 

exploration and management of systemic risks to the MNB, thus entrusting it with the conduct of 

macro-prudential policy and macro-prudential oversight. However, the definition of certain issues  

14  
15  
16  

See the website of the Bank for International Settlements (BIS) at http://www.bis.org/publ/bcbs230.pdf. 
See Principle 2 of the Core Principles for Effective Banking Supervision. 
See also Principle 2.1 of the Core Principles for Effective Banking Supervision. 

5 

 
 
 
 
                                                           
ECB-PUBLIC 

related  to  macro-prudential  policy  remains  in  the  competence  of the  Government.  As  regards the 
Law on credit institutions and financial enterprises17, the Law on capital markets18, and the Law on  

the  protection  of  consumers19,  the  draft  law  does  not  adequately  reflect  the  division  of  tasks 

between the MNB and the Government to be introduced as of 1 October 2013 by the new Law on 

the  MNB.  Each  of  these  legal  acts  would  benefit  from  the  introduction  of  additional  provisions 

providing for a further transfer of Government competences to the MNB. These could include, for 

example,  provisions  relating  to  defining  liquidity  requirements  for  credit  institutions  and 

mismatches  in  the  structures  of  maturity  of  foreign  exchange  exposures;  the  personal, 

organisational  and  technical  requirements  applicable  to  clearing  houses;  and  the  definition  of 

consumer creditworthiness. 

At the same time, the ECB expects to be consulted on any draft national legislation prepared by the 

MNB  Governor  that  falls  within  the  ECB’s  competence,  in  accordance  with  the  provisions  of 

Council Decision 98/415/EC. 

Finally, and also in connection with the provisions of the draft law providing for the operational 

conduct  of  the  new  supervisory  and  macro-prudential  functions  of  the  MNB,  the  ECB  would 

appreciate  receiving  feedback  from  the  consulting  authority  as  regards  steps  taken  in  order  to 

address the outstanding issues concerning central bank independence as noted in this opinion and 

in Opinion CON/2013/56. 

This  opinion  is  without  prejudice  to  the  conclusions  of  the  European  Systemic  Risk  Board’s 

follow-up assessment of Recommendation ESRB/2011/3 of the European Systemic Risk Board of 
22nd  December  2011  on  the  macro-prudential  mandate  of  national  authorities20,  which  will  be 

prepared pursuant to Article 17 of Regulation (EU) No 1092/2010 of the European Parliament and 

of  the  Council  of  24  November  2010  on  European  Union  macro-prudential  oversight  of  the 
financial system and establishing a European Systemic Risk Board21.  

17  
18  
19  
20  
21  

See the amendments to Article 235 of Law CXII of 1996. 
Law XLVII of 2008. 
Law CLV of 1997. 
OJ C 41, 14.2.2013, p.1. 
OJ L 331, 15.12.2010, p. 1. 

6 

 
 
 
                                                           
ECB-PUBLIC 

7.   The MNB’s cooperation with other bodies 

One  of  the  amendments  to  the  draft  law22  repeals  the  provision  that  allows  the  MNB  to  forward 

individual statistical data pertaining to the activities of investment firms and commodity dealers to 

the  ECB  and  the  ESCB  without  it  being  considered  an  infringement.  All  observations  made  in 

paragraph  3.1.9  of  Opinion  CON/2013/56  are  also  valid  in  this  case  and  the  draft  law  should 

therefore  reflect  the  legal  obligation  to  cooperate  with  the  ESCB  and  the  ECB  in  the  field  of 

statistics. 

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

Done at Frankfurt am Main, 7 October 2013. 

[signed] 

The President of the ECB 

Mario DRAGHI 

22  

Point 8 of amending proposal T/12018/3. 

7