Opinion of the European Central Bank of 26 April 2023 on the restriction of the negotiability of discount bills issued by the Magyar Nemzeti Bank and the extension of an interest rate cap (CON/2023/10)
Date: 2023-04-26
Institutions: European Central Bank
Subjects: monetary policy

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 26 April 2023  

on the restriction of the negotiability of discount bills issued by the Magyar Nemzeti Bank and the 

extension of an interest rate cap 

(CON/2023/10) 

Introduction and legal basis 

On  22  March  2023,  a  Hungarian  Government  Decree  89/2023  (III.  22.)  on  economic  and  financial 

measures 1  (hereinafter  the  ‘decree’)  was  published  in  the  Hungarian  Official  Gazette.  The  European 

Central Bank (ECB) has not been consulted by the Hungarian authorities on the decree. 

The ECB has decided to deliver an own initiative opinion on the decree. 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/EC2, as the decree relates to 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 decree 

1.1  The  decree  provides  that  certain  institutions  falling  under  specified  provisions  of  the  Law  on  the 

Magyar Nemzeti Bank 3 (hereinafter the ‘Law on the MNB’) may not purchase, until 30 June 2023, a 

Hungarian forint-denominated debt instrument issued by the central bank of a Member State of the 

Union.  The  institutions  covered  by  this  prohibition  are  voluntary  mutual  insurance  funds,  home 

savings and loan associations, private pensions and private pension funds, insurance institutions,  

entities regulated by the Acts on investment firms, commodity dealers, collective investment firms 

and their managers. The same prohibition applies to natural persons if their investment exceeds HUF 

20,000,000. 

1.2  The decree extends from 31 March 2023 to 30 June 2023 the existing requirement under Decree 

471/2022 (XI. 21.)  on certain  economic  measures 4, which stipulates that  in the case of the same 

persons and entities covered by the decree, the interest paid on demand deposits with a maximum 

maturity of one year under deposit agreements concluded with a credit institution may not exceed 

1  

2  

3  

4  

A Kormány 89/2023. (III. 22.) Korm. rendelete gazdasági, finanszírozási tárgyú intézkedésekről, közzétéve a Magyar 
Közlöny 2023/41. számában. 

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  Section  39(1)(a),  (d),  (f),  (i),  (l)  and  (m)  of  the  Law  on  the  MNB.  A  Magyar  Nemzeti  Bankról  szóló  2013.  évi 
CXXXIX. törvény. 
A Kormány 471/2022. (XI. 21.) Korm. rendelete egyes gazdasági tárgyú intézkedésekről, közzétéve a Magyar Közlöny 
2022/190. számában. 

 
 
 
 
 
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the average yield of the last auction of the discount Treasury bill issued by the Hungarian State with 

a remaining maturity of three months, as published on the official website of the Államadósság Kezelő 

Központ (Hungarian Government Debt Management Agency) (hereinafter the ‘interest rate cap’). 

1.3  The decree entered into force on 23 March 2023.  

2. 

Background 

2.1  Following  the  Russian  Federation’s  invasion  of  Ukraine,  pre-existing  inflationary  pressures  were 

compounded  by  further  rising  energy  prices,  leading  to  consumer  price  inflation  based  on  the 

Harmonised Index of Consumer Prices (HICP) to exceed 25 % in February 2023, which is the highest 

level in the Union5. Against rising inflationary pressures, the MNB increased its base rate from 0.6 % 

in June 2021 to 13.0 % in September 2022 6. In October 2022, the MNB announced one-day deposit 

quick tenders on a daily basis at an interest rate of 18.0 %7. 

2.2 

In December 2021 the MNB introduced a discount bill programme, primarily, the ECB understands, 

for the purposes of implementing the MNB’s monetary policy8. The programme was based on the 

applicable provisions of the Law on the MNB, which state that the MNB shall define and implement 

monetary policy, and that, as an instrument of its monetary policy, the MNB can issue securities 9. 

The discount bills issued by the MNB were available for purchase by (1) credit institutions having a 

registered office in Hungary, (2) foreign credit institutions having a registered office in the European 

Economic  Area  (EEA)  and  with  a  branch  office  in  Hungary  that  act  through  their  branch  office  in 

Hungary,  and  (3)  Hungarian  branch  offices  of  foreign  credit  institutions  having  a registered  office 

outside the EEA. The bills were freely negotiable 10. 

2.3  The  ECB  understands  that in the autumn of  2022,  the Government noted that  high  interest rates 

were being earned on deposits made by certain investors pursuant to agreements with their credit 

institutions under which those investors deposited  amounts with those credit  institutions which,  in 

turn, deposited them with the MNB. This enabled those investors to earn a higher level of interest 

than that earned on debt securities issued by the Government. With the intention of preventing this, 

the Government adopted the interest rate cap. The Minister for Economic Development announced 

that  the  interest  rate  cap  was  necessary  to  ensure  the  smooth  functioning  of  the  lending  and 

distribution of government bonds and the channelling of resources into the economy by guaranteeing 

that the interest paid by the MNB on deposits will not be available to investors 11. 

2.4 

In  2021  and  2022,  the  discount  bills  issued  by  the  MNB  were  issued  infrequently.  Following  the 

introduction of the interest rate cap, the MNB significantly amended its discount bill programme, by 

announcing regular weekly tenders. The ECB understands that this facilitated credit institutions to 

5  
6  
7  
8  

9  
10  

11  

See ‘HICP Overall Index’ available on the ECB Statistical Warehouse website at https://sdw.ecb.europa.eu. 

See ‘Central bank base rate history’ available on the MNB’s website at www.mnb.hu.  
See ‘Deposit Quick Tender’ available on the MNB’s website. 

See ‘Information Sheet for the issuance of the Discount bill of the Magyar Nemzeti Bank’, p.1, available on the MNB’s 
website. 

See Sections 4(1) and 18(c) of the Law on MNB. 
See ’Information Sheet for the issuance of the Discount bill of the Magyar Nemzeti Bank’, p. 3, available on the MNB’s 
website. 

See Minister for Economic Development, press release: ‘No more profiteering’, available at www.kormany.hu. 

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ECB-PUBLIC 

directly purchase discount bills from the MNB and sell these bills to institutional investors to whom 

the interest rate cap applies. Following the amendments to the MNB discount bill programme, the 

amounts  allotted  under  the  programme  increased  significantly.12.  The  ECB  understands  that  the 

increased  reliance  on  the  discount  bills  programme  was  intended,  inter  alia,  to  address  obvious 

impairments in the monetary policy transmission mechanism that had been created by interest rate 

caps on demand deposits imposed by Decree 471/2022 (XI. 21.). 

3. 

Observations 

3.1  Article 130 of the Treaty provides that when exercising the powers and carrying out the tasks and 

duties conferred upon them by the Treaties and the Statute of the European System of Central Banks 

and of the European Central Bank (the ‘Statute of the ESCB’), neither a national central bank (NCB), 

including the MNB, nor any member of its decision-making bodies, shall seek or take instructions 

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

any  other  body;  the  Union  institutions,  bodies,  offices  or  agencies,  and  the  governments  of  the 

Member States undertake to respect this principle and not to seek to influence the members of the 

decision-making bodies of the NCBs in the performance of their tasks13.  

3.2  Article 130 of the Treaty also applies to Member States with a derogation, meaning Member States 

in respect of which the Council has not yet decided that they fulfil the necessary conditions for the 

adoption of the euro, like Hungary. This provision is not referred to by Article 139(2) of the Treaty, 

which lists the provisions of the Treaties that do not apply to such Member States with a derogation. 

In contrast, Article 139(2) of the Treaty in conjunction with Article 42.2 of the Statute of the ESCB 

clarifies that the central banks of Member States with a derogation, including the MNB, shall retain 

their powers in the field of monetary policy according to national law. Consistent with these Treaty 

requirements, the independence of the MNB, and the concomitant primary objective of the MNB to 

maintain price stability, are enshrined in Hungarian law 14. 

3.3  Central  bank  independence  is  served  by  providing  the  NCBs  with  the  necessary  means  and 

instruments  to  conduct  an  efficient  monetary  policy  and  to  achieve  the  price  stability  objective 

independently of any other authority, reflecting the generally held view that the primary objective of 

price stability is best served by a fully independent institution15.  

3.4  The  ECB  understands  that  the  MNB’s  discount  bill  programme  is  a  monetary  policy  instrument 

introduced by the MNB as part of the overall definition and implementation of the MNB’s monetary 

policy.  However,  the  decree,  in  addition  to  extending  the  interest  rate  cap  until  30  June  2023, 

prohibits certain institutions from  purchasing,  until 30  June 2023, a Hungarian  forint-denominated 

debt  instrument  issued  by  the  central  bank  of  a  Member  State.  Hence,  the  decree,  including  the 

12  

13   
14  
15  

In the weekly issuances starting on 1 February 2023, the MNB allotted HUF 9,311.029 billion. On 1 February 2023 
HUF 864.507 billion was allotted, on 8 February 2023 HUF 958.169 billion was allotted, on 15 February 2023 HUF 
906.026 billion, on 22 February 2023 HUF 1,392.866 billion, on 1 March 2023 HUF 1,190.869 billion, on 8 March 2023 
HUF 1,150.130 billion, on 14 March 2023 HUF 1,389.773 billion, on 21 March 2023 HUF 382.997 billion, and on 22 
March 2023 HUF 1,075.692. See ‘Discount bill auction results’, available on the MNB’s website. 
Article 130 of the Treaty is reiterated by Article 7 of the Statute. 
See Sections 1(2) and 3(1) of the Law on MNB. 

See Convergence Report, June 2022, p. 20. 

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interest  rate  cap,  interferes  with  the  independence  of  the  MNB,  since  it  impedes  the  MNB  from 

independently  choosing  the  necessary  means  and  instruments  to  conduct  an  efficient  monetary 

policy and to independently achieve the price stability objective.  

3.5  Therefore, the decree infringes the independence of the MNB under Article 130 of the Treaty.  

ECB-PUBLIC 

This opinion will be published on EUR-Lex. 

Done at Frankfurt am Main, 26 April 2023. 

[signed] 

The President of the ECB 

Christine LAGARDE 

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