Opinion of the European Central Bank of 10 November 2022 on the dividend payments, recapitalisation and reimbursement of the Magyar Nemzeti Bank (CON/2022/37)
Date: 2022-11-10
Institutions: European Central Bank
Subjects: institutional activity

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 10 November 2022 

on the dividend payments, recapitalisation and reimbursement of the Magyar Nemzeti Bank  

(CON/2022/37) 

Introduction and legal basis 

On 7 October 2022, 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  Bank 1  and  Decree 

221/2000, (XII.19.) of the Government on the special reporting and accounting requirements of the Magyar 

Nemzeti Bank (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  (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. 

The main purpose of the draft law is to modify the provisions of the Law on the Magyar Nemzeti 

Bank  (hereinafter  the  ‘Law  on  the  MNB’)  and  the  Decree  221/2000,  (XII.19.)  of  the  Government  on  the 

special reporting and accounting requirements of the Magyar Nemzeti Bank (hereinafter the ‘Decree on the 

MNB’s  accounts’)  that  relate  to  the  MNB’s  dividend  payments  and  the  MNB’s  recapitalisation  and 

reimbursement by the State at the MNB’s initiative.  

Dividend payments. 

1.2. 

Under the current provisions of the Law on the MNB3, the MNB shall pay a dividend from the portion 

of its retained earnings that are not used to offset any negative amount in the MNB’s revaluation reserves 4, 

supplemented by the MNB’s profits from the year under review, in accordance with a decision of the MNB’s 

Executive Board5. 

1.3. 

As  noted  in  the  explanatory  memorandum  accompanying  the  draft  law,  the  draft  law  would 

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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). 
See Article 166(1) of the Law on the MNB. 
Pursuant to Article 147(5) of the Law on the MNB. 

Pursuant to Article 12(4), point b), of the Law on the MNB. 

 
 
 
 
 
 
 
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introduce a rule-based dividend payment practice, in line with common practices at Union central banks. 

Under the draft law the new dividend payment regime provides for automatic and discretionary dividend 

payments. In particular, the draft law provides that if the amount of the MNB’s equity exceeds its subscribed 

capital at the end of the year under review, the MNB will pay 50 % of its profit for the year under review as 

a dividend (automatic dividend payment). In addition, the draft law provides that the MNB will pay dividends, 

based on a decision of its Executive Board, from the positive amount of its retained earnings supplemented 

by the loss or 50 % of its profit from the year under review, up to the amount of the equity exceeding the 

subscribed capital (discretionary dividend payment).  The dividend payment  is due within 30  days  of the 

MNB sending the notification of the report for the year under review 6 to the shareholders. 

Recapitalisation and reimbursement. 

1.4. 

Under the current provisions of the Law on the MNB7, where the amount of loss incurred in the 

year under review exceeds the retained earnings, the difference shall be reimbursed from the central budget 

directly to the retained earnings within eight days of the shareholder’s receipt of the notification of the annual 

financial statements for the year under review 8. In addition, under the current provisions of the Law on the 

MNB9, if the balance of the revaluation reserves is negative, and this negative balance exceeds the sum of 

the retained earnings and the result for the year under review, a direct cash disbursement must be made 

from the central budget to the retained earnings up to the level of the negative balance that exceeds the 

sum of the retained earnings and the result of the year under review.  

1.5. 

As noted in the explanatory memorandum accompanying the draft law, the current recapitalisation 

and reimbursement rule may require reimbursement from the central budget, regardless of the needs of 

the  central  bank.  However,  according  to  the  explanatory  memorandum,  although  there  is  sufficient  net 

equity to allow the MNB to perform its fundamental tasks, the current rules may require a significant lump-

sum reimbursement from the central budget that could lead to a sub-optimal policy mix. In a stagflationary 

environment, monetary policy needs to tighten conditions to bring inflation down, while fiscal policy may 

implement  targeted  programmes  to  support  the  real  economy.  However,  immediate  fiscal  pressure 

stemming from a significant lump-sum reimbursement limits fiscal policy’s room for manoeuvre. The MNB’s 

room  for  manoeuvre  may  be  increased  by  giving  a  longer  period  of  time  to  the  State  to  fulfil  the 

reimbursement obligation.    

1.6. 

Against  this  backdrop,  the  draft  law  proposes  to  replace  the  existing  recapitalisation  and 

reimbursement regime by a new regime. In particular, the draft law provides that where the amount of equity 

falls below the subscribed capital at the end of the year under review, the difference will be reimbursed 

from the central budget directly to the retained earnings over a period of five years, with equal instalments 

being paid every year, within 30 days of the shareholder’s receipt of the notification of the report for the 

year under review10. For this purpose, the ‘equity’ consists of the following elements: (1) subscribed capital; 

(2)  retained  earnings;  (3)  valuation  reserve;  (4)  revaluation  reserve  due  to  exchange  rate  change;  (5) 

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In accordance with Article 6(2) of the Law on the MNB. 

See Article 166(3) of the Law on the MNB. 
Pursuant to Article 6(2) of the Law on the MNB. 
See Article 147(4) and (5) of the Law on the MNB. 

In accordance with Article 6(2) of the Law on the MNB. 

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revaluation reserve of foreign currency securities; and (6) the result of the financial year under review11. 

The ‘subscribed capital’ of the MNB is ten billion forints 12. If the amount of the equity exceeds the subscribed 

capital, all outstanding repayment obligations cease. If, within the five-year period, the central budget incurs 

a new reimbursement obligation, the new provisions of the draft law will apply to fulfilling this obligation.  

2. 

General observation 

2.1. 

The ECB would like to emphasise that, although Member States with a derogation, like Hungary, 

do not yet participate in the third stage of economic and monetary union, they have a legal duty to adapt 

the statutes of their national central banks (NCBs) to ensure compatibility with the TFEU13 and the Statute 

of the European System of Central Banks (ESCB) and of the ECB (hereinafter the ‘Statute of the ESCB’). 

Any legislative reform in non-participating Member States should aim to gradually achieve consistency with 

Eurosystem standards 14. 

3. 

Specific observations 

3.1. 

Article 130 TFEU and Article 7 of the Statute of the ESCB expressly prohibit the ECB, the NCBs, 

and  the  members  of  their  decision-making  bodies  from  seeking  or  taking  instructions  from  Union 

institutions, bodies, offices or agencies, from any government of a Member State or from any other body, 

on the one hand, and prohibits those Union institutions, bodies, offices or agencies and any government of 

a Member State from seeking to influence the members of the decision-making bodies of the ECB and the 

NCBs in the performance of their tasks, on the other. The intention of these provisions is to shield the ESCB 

from  all  political  pressure  in  order  to  enable  it  effectively  to  pursue  the  objectives  ascribed  to  its  tasks, 

through the independent exercise of the specific powers conferred on it for that purpose by primary law 15. 

National rules therefore cannot, without infringing Article 130 TFEU and Article 7 of the Statute of the ESCB, 

place the NCB concerned in a situation where it is potentially exposed to political pressure or which in any 

way undermines its ability to carry out independently a task falling within the scope of the ESCB16.  

3.2. 

In that regard, in order to ensure the independence of the ECB, the authors of the TFEU provided, 

inter alia, in the third sentence of Article 282(3) TFEU, that it is to be independent in the management of its 

finances. While it is true that neither the TFEU nor the Statute of the ESCB lay down an equivalent rule in 

respect of the NCBs, the fact remains that the basic tasks of the ESCB fall, through the ESCB, not only on 

the ECB but also on the NCBs 17. The ECB has consistently held that the overall independence of the NCB 

concerned would be jeopardised if it could not autonomously avail itself of sufficient financial resources to 

perform the ESCB-related tasks required of it under the Treaty and the Statute of the ESCB18. In order to 

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See Annex I. of the Decree on the MNB’s accounts. 
See Article 5(5) of the Law on the MNB. 

See Article 131 TFEU. 
See, e.g., paragraph 3.4 of ECB Opinion CON/2008/34 and paragraph 2.1 of ECB Opinion CON/2017/17. All ECB 
opinions are published on EUR-Lex. 
See,  e.g.,  judgment  of  26  February  2019,  Rimšēvičs  and ECB v Latvia,  Joined  Cases  C-202/18  and  C-238/18, 
EU:C:2019:139, paragraph 47. 
Judgment of 13 September 2022, Banka Slovenije, Case C-45/21, EU:C:2022:670, paragraphs 97 and 104. 
Judgment in Banka Slovenije, Case C-45/21, cited above, paragraphs 98 and 99. 

ECB Convergence Report 2022, Chapter 2.2.3, first paragraph of the section on ‘Financial independence’. 

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have at its disposal the funds necessary to carry out its tasks within the ESCB, national rules may not place 

the NCB concerned in a situation where it is forced to seek the consent of those political authorities in order 

to obtain funding or recapitalisation19. In order to participate in the implementation of the EU’s monetary 

policy, the establishment of reserves by the NCBs is essential20.  

3.3. 

The ECB has consistently held that, in particular, any situation should be avoided whereby for a 

prolonged period of time an NCB’s net equity is below the level of its statutory capital or is even negative, 

including where losses beyond the capital and the reserves are carried over. Therefore, the event of an 

NCB’s net equity becoming less than its statutory capital or even negative would require that the respective 

Member State provides the NCB with an appropriate amount of capital at least up to the level of the statutory 

capital within a reasonable period of time so as to comply with the principle of financial independence21. It 

is unclear to what extent the draft law would ensure that the MNB’s equity would be restored up to the level 

of the MNB’s subscribed capital within a reasonable period of time, given that the amounts to be reimbursed 

from the central budget are to be reimbursed in equal instalments over a period of five years. Moreover, to 

the extent that the amount of the MNB’s equity falls below its subscribed capital over a period of two or 

more successive years, this could further exacerbate an inadequate or even negative capital position over 

a prolonged period of time in excess of five years. The ECB therefore suggests introducing a safeguard 

clause into the draft law to the effect that in the event of an inadequate or even negative capital position 

during a prolonged period, it should be ensured in the medium-term that the MNB's net equity capital does 

not remain below the subscribed capital for a prolonged period.  

3.4.  With regard to profit allocation, an NCB’s statutes may prescribe how its profits are to be allocated, 

as is proposed by the draft law. Profits may be distributed to the State budget only after any accumulated 

losses from previous years have been covered and financial provisions deemed necessary to safeguard 

the real value of the NCB’s capital and assets have been created 22. As previously noted by the ECB23, the 

NCB is best placed to assess independently what level of reserves is necessary to enable it to perform its 

tasks, and such a decision should not be the subject of a third party’s decision.   

This opinion will be published on EUR-Lex.  

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Judgment in Banka Slovenije, Case C-45/21, cited above, paragraph 104. 
Judgment in Banka Slovenije, Case C-45/21, cited above, paragraph 100. 

ECB Convergence Report 2022, Chapter 2.2.3, fourth paragraph of the section on ‘Financial independence’. 
ECB Convergence Report 2022, Chapter 2.2.3, first paragraph of the section on ‘Distribution of profits, NCBs’ capital 
and financial provisions’’. 

See paragraph 3.4.3 of ECB Opinion CON/2017/17.  

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Done at Frankfurt am Main, 10 November 2022. 

[signed] 

The President of the ECB 

Christine LAGARDE 

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