Regulatory Requirements for Financial Institutions in Hungary

The Hungarian financial system has undergone significant changes since the country’s transition to a market-based economy. The National Bank of Hungary (NBH) plays a crucial role as the central bank, while commercial banks and specialized institutions operate under separate functions.

Banking System

Hungary operates a two-tier banking system, where the NBH and other specialized banks (commercial banks and specialized institutions) perform their duties independently from the government.

• Commercial Banks: Must be registered as company limited by shares or as a branch office of a foreign bank.
• Permit Requirements: A permit from the State Supervisory Authority for Financial Institutions (PSzÁF) is required before commencement of operations.

Capital Requirements

Commercial banks are required to have an initial capital of at least HUF 2 billion (EUR 8 million).

• Foreign Registered Credit Institutions: Can establish bank representation but may not engage in business activities.
• Cross-Border Services: Since Hungary’s accession to the EU, credit institutions registered in another Member State may provide cross-border services.

Capital Market

The Budapest Stock Exchange (BSE) was re-established in 1990 and has since grown into a robust market with 39 members and 72 issuers.

• Regulation: The Capital Markets Act regulates securities issues, conversion of securities, and marketing of securities.
• Service Activities: Separate legislation governs the service activities of investment service providers and commodities brokers.

Insurance Market

Hungary’s insurance market is regulated by Act LX of 2003 on Insurance Companies and their Activities.

• Insurance Companies: 26 insurance companies operate in the country.
• Growth: Institutional pension funds and insurance companies have been growing rapidly, offering a full range of insurance products.