Hungary’s Regulatory Requirements for Financial Institutions: A Comprehensive Overview

Introduction

The Hungarian financial market has undergone significant reforms in recent years, aligning with European Union regulations and creating a stable environment for capital-related institutions, products, and services. The National Bank of Hungary (Magyar Nemzeti Bank - MNB) is the central bank, responsible for maintaining price stability and regulating the banking sector.

Credit Institutions

According to Act CCXXXVII of 2013 on Credit Institutions and Financial Enterprises, credit institutions are financial institutions that collect deposits and provide credit lines and loans. Commercial banks can operate in Hungary as a company limited by shares (Rt.) or as a branch office of a foreign bank. The MNB determines the range of financial services that commercial banks may provide.

• Types of Credit Institutions:
  • Company limited by shares (Rt.)
  • Branch office of a foreign bank
• Key Responsibilities:
  • Collecting deposits
  • Providing credit lines and loans

Foreign Investment

Hungary’s accession to the European Union has enabled credit institutions registered in other EU member states to engage in cross-border services. Foreign professional investors own more than 90% of the registered capital in the banking sector, with 35 commercial banks under their control.

• Key Statistics:
  • Over 90% foreign ownership
  • 35 commercial banks controlled by foreign investors
• Concerns about State Ownership:
  • Government increasing stake in several major banks

Methods of Payment

The use of cash is still prevalent in Hungary, but card payments have grown significantly in recent years. Bank cards are widely accepted, and all commercial banks offer no-fee cash withdrawals twice a month to their clients.

• Key Statistics:
  • 38-40% retail payments made by card
  • Over 4,800 ATMs available throughout the country

Banking System

The Hungarian banking system is a two-tiered system, with the MNB occupying the first level and commercial banks occupying the second level. The largest commercial banks in Hungary are OTP - Hungarian Savings Bank, MBH (Hungarian Bank Holding), Commercial and Credit Bank (K&H), UniCredit, Erste, Raiffeisen, and CIB Bank.

• Key Players:
  • National Bank of Hungary (MNB)
  • OTP - Hungarian Savings Bank
  • MBH (Hungarian Bank Holding)
  • Commercial and Credit Bank (K&H)

Foreign-Exchange Controls

There are no foreign exchange controls in Hungary, allowing for free movement of capital. U.S.-based banks operate in the country, with Citi being the only bank offering commercial banking services.

• Key Statistics:
  • No foreign exchange controls
  • Over 4,800 ATMs available throughout the country
  • Free movement of capital

Conclusion

Hungary’s regulatory requirements for financial institutions are aligned with European Union regulations, creating a stable environment for capital-related institutions, products, and services. The country’s banking system is well-developed, with a two-tiered structure and a wide range of payment options available. Foreign investment has been significant in the banking sector, but concerns about state ownership remain.