Opinion of the European Central Bank of 19 March 2021 on the mandate and tasks of the Magyar Nemzeti Bank relating to environmental sustainability (CON/2021/12)
Date: 2021-03-19
Institutions: European Central Bank
Subjects: monetary policy

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 19 March 2021 

on the mandate and tasks of the Magyar Nemzeti Bank relating to environmental sustainability 

(CON/2021/12) 

Introduction and legal basis 

On  18  December  2020,  the  European  Central  Bank  (ECB)  received  a  request  from  the  Hungarian 
Ministry  of  Finance  for  an  opinion  on  a  draft  law  amending  the  Law  on  the  Magyar  Nemzeti  Bank1 

(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  (TFEU)  and  the  third  indent  of  Article 2(1)  of  Council  Decision 
98/415/EC2, as the draft law concerns the Magyar Nemzeti Bank (hereinafter 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 law 

1.1  According to the explanatory memorandum accompanying the draft law, which has been prepared 

by the MNB for the Hungarian Ministry of Finance, the draft law was conceived by the MNB in line 

with its vision of a green central bank.  

1.2  The draft law would amend the Law on the MNB in three respects. 

1.3  First,  the  draft  law  provides  that,  without  prejudice  to  its  primary  objective  of  achieving  and 

maintaining price stability, as a secondary objective, the MNB supports the government’s economic 

policy and its policy related to environmental sustainability, using instruments at its disposal.  

1.4  The  explanatory  memorandum  emphasises  that  environmental  sustainability  concerns  are 

expected  to  have  a  fundamental  impact  on  price  and  financial  stability,  and,  therefore,  greater 

emphasis must be placed on these issues by central banks. The explanatory memorandum notes 

that integrating environmental sustainability considerations has been added to a growing range of 

central  bank  activities,  including  incorporating  risks  arising  from  climate  change  into  the  various 

aspects of financial stability, taking into account the risk exposures of financial market participants 

identified  in  relation  to  climate  change,  and  minimising  the  ecological  footprint  of  central  bank 

operations. Environmental sustainability also has an effect on monetary policy: environmental and 

1  
2  

A Magyar Nemzeti Bankról szóló 2013. évi CXXXIX. törvény. 

Council  Decision  98/415/EC  of  29 June  1998  on  the  consultation  of  the  European  Central  Bank  by  national 
authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42). 

 
 
 
 
                                                 
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weather  processes  can  lead  to  an  increase  in  the  volatility  of  food  prices,  and  the  structural 

transformation of the economy can have an influence on inflation over the longer term. Reference 

is  made  in  this  context  to  the  assessment  of  inter-relationships  between  climate  change  and 

monetary policy as part of the ECB’s strategy review. According to the explanatory memorandum, 

the  MNB  is  not  explicitly  entitled  by  current  law  to  take  action  in  relation  to  environmental 

sustainability  in  the  context  of  monetary  policy.  Thus,  the  Hungarian  legislator  considers  it 

necessary  to  prescribe  in  the  Law  on  the  MNB  that  the  MNB  shall  support  environmental 

sustainability with the means at its disposal, without prejudice to its primary objective of achieving 

and maintaining price stability.  

1.5  Second, the draft law enables the MNB to use the revenues from supervisory fees, fines imposed 

by the MNB and administrative service fees to offset the impact of its activities on the environment, 

in order to facilitate and support the implementation of environmental objectives. The explanatory 

memorandum clarifies in this respect that the MNB would like to provide a positive example in the 

field  of  environmental  protection  to  institutions  under  its  supervision  and  other  domestic 

organisations.  

1.6  Third,  the  draft  law  provides  that,  as  instruments  of  its  monetary  policy,  the  MNB  will  provide 

energy  efficiency  consumer  loans  and,  in  relation  to  this  task,  the  MNB  will  manage  Hungarian 

forint accounts for consumers. The explanatory memorandum explains that in Hungary residential 

buildings are responsible for nearly 25 % of the national primary energy consumption, and energy 

consumption  per  dwelling  is  high  compared  to  the  European  Union  average.  In  addition,  the 

renewal rate of the housing stock is lower than the regional average. The MNB introduced a Green 
Preferential  Capital  Requirement  Programme3  in  2019.  The  programme  ensures  that  credit 

institutions  receive  a  Pillar  II  capital  requirement  reduction  on  consumer  loans  serving  energy-

efficient home purposes if consumers receive an interest rate subsidy. However, up to now banks 

have not incorporated the beneficial features of green mortgage loans into their lending standards 

and prices. According to the  explanatory memorandum, as the current business models of banks 

do  not  incorporate  the  positive  externalities  relating  to  energy  efficient  mortgages,  a  central  bank 

programme  that  enables  direct  lending  to  retail  clients  would  be  needed.  This  could  spur  green 

residential  real  estate  constructions  and  renovations,  help  renew  the  domestic  residential  real 

estate stock, and therefore support cutting greenhouse gas emissions. The programme would also 

incentivise market participants to provide new green housing loans.  

2. 

Explicit reference in the MNB’s objectives to support of environmental sustainability  

2.1  The ECB welcomes the proposed amendment of the MNB’s mandate, which provides that, without 

prejudice  to  its  primary  objective  of  achieving  and  maintaining  price  stability,  the  MNB  shall 

support, as a secondary objective, the government’s policy related to environmental sustainability. 

The ECB understands that the purpose of the draft law is to emphasise the role of environmental 

sustainability amongst the MNB’s secondary objectives. 

3 

‘MNB introduces a green preferential capital requirement programme’, press releases 2019, available on the MNB’s 
website at www.mnb.hu 

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2.2  The ECB notes that supporting the general economic policies of the government, without prejudice 

to its primary objective of achieving and maintaining price stability, is already part of the mandate of 

the  MNB. Policies contributing  to  a  high  level  of  environmental  protection  that  have  an  economic 

dimension or qualify as general economic policies of the government are implicitly covered by the 

current  mandate  of  the  MNB.  Hence,  the  ECB  understands  that  the  draft  law  does  not  aim  at 

introducing a substantial reform of the MNB’s mandate, but rather at clarifying the MNB’s existing 

mandate by explicitly specifying environmental sustainability as a secondary objective of the MNB.  

2.3  The  proposed  change  to  the  MNB’s  mandate  provided  for  in  the  draft  law  is  compatible  with  the 

Treaties. In accordance with Articles 119(2), 127(1) and 282(2) of the TFEU the primary objective 

of the European System of Central Banks (ESCB) is to maintain price stability. Without prejudice to 

the objective of price stability, the ESCB supports the general economic policies in the Union with a 

view to contributing to the achievement of the objectives of the Union as laid down in Article 3 of 

the  Treaty  on  the  European  Union  (TEU).  The  ESCB  acts  in  accordance  with  the  principle  of  an 

open market  economy with free competition, favouring an efficient allocation of resources, and in 

compliance with the principles set out in Article 119 TFEU. Article 3(3) TEU in turn provides that the 

Union  must,  inter  alia,  work  for  the  sustainable  development  of  Europe  based  on  balanced 

economic  growth  and  price  stability,  a  highly  competitive  social  market  economy,  aiming  at  full 

employment and social progress, and a high level of protection and improvement of the quality of 

the environment. In addition, Article 11 TFEU provides that environmental protection requirements 

must be integrated  into the  definition  and implementation  of  the  Union’s  policies and  activities,  in 

particular  with  a  view  to  promoting  sustainable  development.  In  the  same  vein,  Article  37  of  the 

Charter of Fundamental Rights of the European Union stipulates that a high level of environmental 

protection  and  the  improvement  of  the  quality  of  the  environment  must  be  integrated  into  the 

policies of the Union and ensured in accordance with the principle of sustainable development.  

2.4  Climate change can specifically impact central banks, and the manner in which they discharge their 

mandates. Physical risks and transition risks associated with climate change can potentially cause 
abrupt  changes  in  prices  and  thereby  threaten  price  stability4.  Although  methodologies  to  assess 

the  magnitude  of  climate-related  risks  for  banks  and  financial  stability  are  still  being  developed, 
available estimates suggest that the impact of these risks is likely to be significant5. This, in turn, 

could  impair  the  transmission  mechanism  of  monetary  policy.  The  Network  of Central  Banks  and 

Supervisors for Greening the Financial System (hereinafter the ‘NGFS’), an international group of 

87  central  banks  and  supervisors,  including  most  ESCB  central  banks,  recommends,  therefore, 

that  central  banks  consider  the  possible  effects  of  climate  change  on  the  economy.  The  NGFS 

argues that these effects may be relevant to monetary policy even if they only materialise beyond 
the conventional three- to five-year policy horizon6.  

4  

5  

6 

See Christine Lagarde, ‘Climate change and central banking’, ILF conference on Green Banking and Green Central 
Banking, Frankfurt am Main, 25 January 2021, available on the ECB’s website at www.ecb.europa.eu.  

See Isabel Schnabel, ‘Never waste a crisis: COVID-19, climate change and monetary policy’, virtual roundtable on 
‘Sustainable  Crisis  Responses  in  Europe’,  INSPIRE  Research  Network,  17  July  2020,  available  on  the  ECB’s 
website at www.ecb.europa.eu.  

See  ‘Climate  change  and  monetary  policy:  initial  takeaways,  technical  document,  June  2020,  available  on  the 
Network of Central Banks and Supervisors for Greening the Financial System’s website at www.ngfs.net. f 

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3. 

Offsetting the MNB’s carbon footprint 

The ECB welcomes the MNB’s initiative to offset its carbon footprint as a complementary measure to the 

accomplishment of its other institutional environmental objectives. While many central banks in the ESCB 

seek to offset their carbon footprint as part of good corporate governance, it is relatively rare for central 

banks’ activities in this area to be specifically mandated by law. In this respect, the ECB understands that 

this specific provision in the  draft law is introduced to make the MNB’s spending on the offsetting of its 

carbon  footprint  transparent,  and  that  the  draft  law  does  not  authorise  the  MNB  to  use  its  revenues  to 

facilitate and support the implementation of environmental objectives generally, but rather only to avoid, 

reduce and offset the impact of the MNB’s own activities on the environment. 

4. 

The MNB’s new task to provide energy efficiency loans to consumers 

4.1  The draft law confers a new task on the MNB by requiring the MNB, as part of the instruments of its 

monetary policy, to provide energy efficiency loans directly to consumers in order to support green 

residential real estate developments.  

4.2 

In  accordance  with  Article  42.2  of  the  Statute  of  the  ESCB,  the  central  banks  of  Member  States 

with a derogation, including Hungary, retain their powers in the field of monetary policy according to 

national  law.  This  notwithstanding,  the  explanatory  memorandum  accompanying  the  draft  law 

argues that the current business models of banks do not incorporate positive externalities relating 

to  energy  efficient  mortgage  loans  and  therefore  a  central  bank  programme  that  enables  direct 

lending  to  retail  clients  is  needed.  In  this  respect,  the  explanatory  memorandum  does  not 

convincingly  reason  that  such  lending  is  linked  to  the  primary  objective  of  monetary  policy  to 

maintain  price  stability,  which  would  qualify  such  intervention  as  a  monetary  policy  measure. 

Moreover,  direct  residential  real  estate  lending  to  consumers  is  not  expressly  among  the 

instruments of monetary policy envisaged for the ECB and the NCBs by the TFEU and the Statute 

of the ESCB. Monetary operations within the ESCB are typically conducted via the banking sector, 

by setting lending or borrowing conditions which are transmitted to consumers and businesses, or 

via  open  market  operations  that  affect  financing  conditions.  Such  operations  pursue  a  monetary 

policy objective, unlike the direct provision of energy efficiency loans to consumers, which pursue 

an  objective  that  can  be  better  served  by  government  agencies  or  credit  institutions. Against this 

backdrop, the ECB emphasises that a proposed conferral of new tasks on a national central bank 

(NCB) participating in the  ESCB, including the MNB, must be assessed against the prohibition of 

monetary financing laid  down  in Article  123(1) TFEU.  For the  purposes of that prohibition,  Article 
1(1)(b)(ii) of Council Regulation (EC) No 3603/937 defines ‘other type of credit facility’ as, inter alia, 

‘any financing of the public sector’s obligations vis-à-vis third parties’. 

4.3  Ensuring that Member States maintain a sound budgetary policy is one of the key objectives of the 

prohibition on monetary financing, which may not be circumvented. Therefore, the task of financing 

7  

Council  Regulation  (EC)  No  3603/93  of  13  December  1993  specifying  definitions  for  the  application  of  the 
prohibitions referred to in Articles 104 and 104b (1) of the Treaty (OJ L 332, 31.12.1993, p. 1). 

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measures which are normally the responsibility of the Member States, and which are financed from 

their budgetary sources rather than by the NCBs, must not be entrusted to NCBs. To decide what 

constitutes  financing  of  the  public  sector’s  obligations  vis-à-vis  third  parties  –  which  can  be 

translated as the provision of central bank financing outside the scope of central bank tasks – it is 

necessary  to  carry  out,  on  a  case-by-case  basis,  an  assessment  of  whether  the  task  to  be 

undertaken  by  an  NCB  is  a  central  bank  task  or  a  government  task,  i.e.  a  task  within  the 

responsibility  of  the  Member  States.  In  other  words,  adequate  safeguards  must  be  in  place  to 

ensure  that  circumventions  of  the  objective  of  the  prohibition  on  monetary  financing,  which  is  to 

maintain sound budgetary policy by Member States, do not take place. 

4.4  As  part  of  its  discretion  in  the  exercise  of  its  duty  –  on  the  basis  of  Article  271(d)  TFEU  and 

Article 35.6 of the Statute of the European System of Central Banks and of the European Central 

Bank  (hereinafter  the  ‘Statute  of  the  ESCB’)  –  to  ensure  that  NCBs  honour  the  obligations  laid 

down  by  the  TFEU,  the  Governing  Council  has  endorsed  safeguards  in  the  form  of  criteria  for 

determining what may be considered as falling within the scope of ‘the public sector’s obligations 

vis-à-vis third parties’ within the meaning of Article 1(1)(b)(ii) of Regulation (EC) No 3603/93 or, in 

other words, what constitutes a government task, as follows: 

First, central bank tasks are, in particular, those tasks that are related to the tasks that have been 

conferred  upon  the  ECB  and  the  NCBs  by  TFEU  and  the  Statute  of  the  ESCB.  These  tasks  are 

mainly defined in Article 127(2), (5) and (6), and Article 128(1) TFEU, as well as in Article 22 of the 

Statute of the ESCB. 

Second, as Article 14.4 of the Statute of the ESCB allows NCBs  to perform ‘functions other than 

those specified in [the Statute of the ESCB]’, new tasks, i.e. tasks that are not related to tasks that 

have been conferred upon the ECB and the NCBs, are not precluded per se. However, new tasks 

that  are  undertaken  by  an  NCB  and  which  are  atypical  of  NCB  tasks  or  which  are  clearly 

discharged on behalf of, and in the exclusive interest of the  government or of other public sector 

entities, should be considered government tasks. 

Third,  an  important  criterion  for  qualifying  a  new  task  as  atypical  of  an  NCB  task,  or  as  being 

clearly  discharged  on  behalf  of  and  in  the  exclusive  interest  of  the  government  or  other  public 

sector entities, is the impact of the task on the institutional, financial and personal independence of 

that NCB. 

In particular, the following aspects should be taken into account: 

(a)  whether  the  performance  of  the  new  task  creates  conflicts  of  interest  with  existing  central 

bank tasks which are  not adequately  addressed,  and its  performance  does  not necessarily 

complement those existing central bank tasks. If a conflict of interest arises between existing 

and  new  tasks,  sufficient  safeguards  to  mitigate  that  conflict  should  be  in  place.  The 

complementarity  between  a  new  task  and  existing  central  bank  tasks  should  not  be 

interpreted  broadly  so  that  it  could  lead  to  the  creation  of  an  indefinite  chain  of  ancillary 

tasks. Such complementarity should be examined in relation to the financing of those tasks;  

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(b)  whether without new financial resources the performance of the new task is disproportionate 

to  the  NCB’s  financial  or  organisational  capacity,  and  may  have  a  negative  impact  on  the 

capacity to properly perform the existing central bank tasks;  

(c)  whether the  performance  of the  new  task fits into  the institutional set-up  of the  NCB in  the 

light of central bank independence and accountability considerations;  

(d)  whether the performance of the new task harbours substantial financial risks;  

(e)  whether the performance of the new task exposes the members of the NCB decision-making 

bodies  to  political  risks  that  are  disproportionate  and  may  also  have  an  impact  on  their 

personal  independence  and,  in  particular,  on  the  guarantee  of  term  of  office  set  out  in 

Article 14.2 of the Statute of the ESCB. 

4.5  Tasks related to the tasks conferred upon the ECB and the NCBs by the TFEU and the Statute of 

the ESCB 

As previously noted, direct residential real estate lending to consumers is not expressly among the 

instruments of monetary policy envisaged for the ECB and the NCBs by the TFEU and the Statute 

of  the  ESCB.  Moreover,  it  is  not  clear  from  the  explanatory  memorandum  that  such  lending  is 

linked to the primary objective of monetary policy to maintain price stability.   

4.6  Tasks which are atypical of central bank tasks 

Direct  residential  real  estate  lending  to  consumers  is  atypical  of  central  bank  tasks.  With  the 

exception  of  lending  by  some  ESCB  central  banks  to  their  staff,  no  central  bank  in  the  ESCB 

currently  engages  in  direct  lending  to  consumers.  In  certain  Member  States  the  provision  of 

financial  support  to  subsidise  energy  efficiency  loans  to  consumers  in  order  to  support  green 
residential  real  estate  developments  is  conducted  directly  by  the  State,8  or  State-owned  entities 
such as development banks9, funds10 or foundations11, also under co-funded Union schemes12. As 

previously  noted,  monetary  operations  within  the  ESCB  are  typically  conducted  via  the  banking 

sector,  by  setting  lending  or  borrowing  conditions  which  are  transmitted  to  consumers  and 

businesses, or via open market operations that affect financing conditions. Such operations pursue 

8  

9  

10  

11 

12  

For  example,  in  Austria,  financial  subsidies  for  housing  projects  are  granted  and  administered  by  competent 
departments  of  the  regional  governments.  In  France,  the  Ministry  of  Finance  in  collaboration  with  the  Agency  for 
Environment  and  Energy  Management  (ADEME)  promotes  an  eco-loan  to  facilitate  energy  renovation,  granted  by 
commercial banks with a financial ceiling, but regardless of income conditions. 
For example, in Germany, depending on the financial support chosen, either the state-owned promotional bank KfW 
provides  a  subsidised  loan  at  favourable  conditions  or  the  Federal  Office  for  Economic  Affairs  and  Export  Control 
(Bundesamt für Ausfuhrkontrolle BAFA) pays State subsidies. In Greece, such financial support in connection with 
energy-efficient housing projects is granted through the Hellenic Development Bank (HDB). In Latvia, a state-owned 
development  finance  institution  ALTUM  is  mandated  to  provide  financial  aid  for  energy  efficiency  improvement 
measures. 
For example,  in Croatia  the 2003 Law  on  the Fund  for  Environmental Protection and Energy Efficiency set  up the 
Environmental  Protection  and  Energy  Efficiency  Fund  as  a  legal  entity  with  public  authority  for  collecting  and 
investing  extra  budgetary  resources  in  programmes  and  projects  supporting  environmental  and  nature  protection, 
energy efficiency and the use of renewable energy sources. 

For example, in Estonia the KredEx foundation was set up by the Ministry of Economic Affairs and Communications 
inter alia with the aim of increasing the energy performance of residential buildings in Estonia. 

For example, in Ireland the Better Energy Warmer Homes Scheme (BEWHS) is operated by the Sustainable Energy 
Authority  of  Ireland  (SEAI)  and  co-funded  by  the  Irish  Government and  the  Union  through  the  European  Regional 
Development Fund. 

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a  monetary  policy  objective,  unlike  the  direct  provision  of  energy  efficiency  loans  to  consumers, 

which pursue an objective that can be better served by government agencies or credit institutions. 

4.7  Tasks clearly discharged on behalf of and in the exclusive interest of the government 

As noted above, in those Member States where financial support is provided to subsidise energy 

efficiency loans to consumers in order to support green residential real estate developments, this 

support is provided directly by the State, or  by State-owned  entities such as development banks, 

funds or foundations.  

4.8  Extent to which performance of the new tasks creates conflicts of interest with existing central bank 

tasks 

As indicated above, central bank operations in the ESCB are conducted with credit institutions and 

other  market  participants  with  a  view  to  maintaining  the  primary  objective  of  price  stability.  While 

the  ESCB  has  a  duty,  without  prejudice  to  the  objective  of  price  stability,  to  support  the  general 

economic policies in the Union with a view to contributing to the achievement of the objectives of 

the  Union,  including  working  for  a  high  level  of  protection  and  improvement  of  the  quality  of  the 

environment,  it  may  be  questioned  whether  direct  residential  real  estate  lending  to  consumers  to 

support green residential real estate developments would be in accordance with the principle of an 

open market economy with free competition, favouring an efficient allocation of resources, or if any 

interference  with  this  principle  could  be  justified  by  the  central  bank  in  accordance  with 

proportionality  standards.  Mortgage  lending  to  consumers  is  typically  undertaken  by  credit 

institutions  in  an  open  market  economy  where  credit  institutions  compete  with  one  another  for 

mortgage  lending  business,  subject  to  supervision  by  the  public  authorities  responsible  for  the 

prudential supervision of credit institutions (in Hungary, the MNB) and the protection of consumers. 

In  principle,  the  entry  by  a  central  bank  into  this  market  would  distort  the  market,  and  raise 

questions  as  to  how  the  activities  of  the  central  bank  would  be  overseen  or  supervised.  It  would 

seem that credit institutions would be better positioned than central banks to price mortgage loans. 

Moreover,  given  that  central  banks  are  not  the  primary  actors  when  it  comes  to  economic  or 

environmental  policies,  if  the  Hungarian  authorities  perceive  that  there  is  a  need  for  State 

intervention in the mortgage lending market for green residential real estate developments, it would 

seem  incumbent  on  the  authorities  to  explore  options  other  than  direct  lending  to  consumers  by 

central  banks,  such  as  government  subsidies  or  appropriate  lending  arrangements  financed 

through  development  or  other  State-owned  banks.  It  would  otherwise  not  be  apparent  that  the 

departure from the principle of an open market economy could be justified by the central  bank in 

accordance  with  proportionality  standards.  It  should  also  be  noted  that  an  arrangement  whereby 

the central bank is tasked by law to perform certain non-standard tasks stands in stark contrast to 

one  where  the  central  bank  has  the  freedom  to  undertake  operations,  which  could  be  seen  as 

diminishing  central  bank  independence.  The  MNB’s  competence  to  independently  decide  on 
conducting  operations  with  its  monetary  counterparts  via  regular  instruments  of  monetary  policy, 

which  may  support  the  Hungarian  government’s  policy  relating  to  environmental  sustainability, 

should not be prejudiced. 

4.9  Extent  to  which  the  performance  of  the  new  tasks  is  disproportionate  to  MNB’s  financial  or 

organisational capacity 

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The  principle  of  financial  independence  requires  NCBs  to  have  sufficient  means  to  carry  out  not 

only their ESCB-related tasks but also their national tasks, both from an operational and financial 
perspective13. To perform its new task under the draft law, the MNB would be obliged to dedicate 

substantial  additional  human  and  financial  resources  to  manage  its  new  consumer  lending 

portfolios. Mortgage lending is a demanding commercial banking business, requiring extensive due 

diligence  on  the  part  of  lenders,  including  assessing  the  creditworthiness  of  large  numbers  of 

individual  borrowers  in  the  general  population,  valuing  real  estate  in  different  urban  and  rural 

locations,  mobilising  collateral  in  the  form  of  security  interests  over  residential  real  estate  which 

may  need  to  be  foreclosed  in  the  event  of  borrower  default,  ensuring  that  the  borrower  has 

appropriate life and property insurance arrangements in place, attending to any relevant consumer 

protection issues, and so  on.  Central  banks do  not  have  a  particular  operational  expertise  in this 

intricate  business.  The  performance  of  these  extensive  new  tasks  would  therefore  appear  to  be 

disproportionate  to  the  MNB’s  existing  financial  and  organisational  capacity,  in  the  absence  of 

supplementary means being granted to the MNB.  

4.10  Extent to which performance of the new tasks fits into the MNB’s institutional set-up, in the light of 

central bank independence and accountability considerations 

Mortgage  lending  is  a  matter  of  great  interest  to  the  general  public,  as  a  mortgage  loan  counts 

among the  most significant  financial commitments undertaken  by  the individual citizen.  The MNB 

would therefore assume the reputational risk of being held accountable by the general public and, 

indeed,  the  institutions  of  government  for  any  perceived  shortcomings  in  the  performance  of  its 

new consumer lending activities. This new task, therefore, does not appear to smoothly fit into the 

MNB’s existing institutional set-up. 

4.11  Extent to which the performance of tasks harbours substantial financial risks 

The MNB’s proposed lending activities would mean that the MNB would assume substantial credit 

risks  on  its  balance  sheet.  Based  on  the  nature  of  such  loans,  credit  risks  would  remain  on  the 

balance sheet of the central bank for a prolonged period of time, possibly extending to decades. As 

with  any  mortgage  lending  portfolio,  which  is  susceptible  to  fluctuations  in  real  estate  prices  and 

general  economic  developments,  this  activity  could  potentially  expose  the  MNB  to  substantial 

financial  risks.  This  is  different  from  central  banks  providing  credit  to  their  monetary  policy 

counterparts  against  marketable  mortgage-related  collateral,  where  financial  risks  for  the  central 

bank  are  limited  through  adequate  risk  management  measures  such  as  minimum  credit  ratings, 

valuation  haircuts  which  are  marked  to  market  and  margin  calls.  Similar  risk  management 

measures  would  be  impossible  to  implement  for  direct  lending  to  consumers.  Furthermore,  while 

central  bank  credit  through  monetary  policy  operations  is  provided  on  the  same  conditions  to  all 

counterparties,  for  direct  lending  to  consumers  the  creditworthiness  of  the  individual  borrowers 

would  impact  their  eligibility  to  obtain  a  mortgage  loan,  the  principal  amount  of  the  loan,  and  in 

some cases also the interest rate. 

4.12  Conclusion 

13  

See the ECB’s 2016 Convergence Report, p. 25. 

8 

                                                 
ECB-PUBLIC 

The  ECB  supports  the  provision  of  energy  efficiency  loans,  which  is  a  reality  across  the  Union 

already  and  needs  to  be  expanded.  The  ECB  also  understands  the  wish  of  the  Hungarian 

authorities  to  reach  an  acceleration  of  this  kind  of  lending  in  Hungary.  However,  the  new  task 

proposed to be conferred on the MNB to provide energy efficiency loans directly to consumers in 

order  to  support  green  residential  real  estate  developments  is  a  task  which  can  be  more 

appropriately performed by private or state-owned credit institutions or development banks, rather 

than  central  banks.  Within  the  framework  of  the  ESCB,  direct  residential  real  estate  lending  to 

consumers is not among the instruments of monetary policy expressly envisaged for the ECB and 

the  NCBs  by  the  TFEU  and  the  Statute  of  the  ESCB.  This  task  is  atypical  of  central  bank  tasks. 

With  the  exception  of  lending  by  some  ESCB  central  banks  to  their  staff,  no  central  bank  in  the 

ESCB currently engages in direct lending to consumers. In certain Member States the provision of 

financial  support  to  subsidise  energy  efficiency  loans  to  consumers  in  order  to  support  green 

residential  real  estate  developments  is  conducted  directly  by  the  State,  or  state-owned  banks  or 

development banks. Against this backdrop, it is suggested that such a task would be discharged on 

behalf  of  and  in  the  exclusive  interest  of  the  government.  Given  the  substantial  operational 

challenges  of  the  mortgage  lending  business,  this  task  would,  in  the  absence  of  further  means 

being granted to the MNB, be disproportionate to the MNB’s financial and organisational capacity, 

and  could  leave  the  MNB  vulnerable  to  substantial  financial  risks.  The  performance  of  this  task 

would  also  entail  reputational  risks  for  the  MNB,  and  would  not  fit  smoothly  into  the  MNB’s 

institutional  set-up.  The  performance  of  this  task  would  therefore  be  classified  as  a  government, 

rather  than  a  central  banking  task  for  the  purposes  of  the  prohibition  of  monetary  financing,  and 

would,  accordingly,  have  to  be  entirely  conducted  by  the  State,  rather  than  with  central  bank 

resources. Also, the MNB’s competence to independently decide on conducting operations with its 
monetary  counterparts  via  regular  instruments  of  monetary  policy  should  not  be  prejudiced.  In 

conclusion, the ECB notes that central banks can independently decide on conducting operations 

with their monetary counterparts via regular instruments of monetary policy, which may support the 

government’s  policy  relating  to  environmental  sustainability.  However,  for  the  reasons  indicated 

above,  the  Hungarian  authorities  are  strongly  encouraged  not  to  allocate  to  the  MNB  the  task  of 

providing energy efficiency loans directly to consumers.  

This opinion will be published on EUR-Lex.  

Done at Frankfurt am Main, 19 March 2021. 

[signed] 

The President of the ECB 

Christine LAGARDE 

9