Hungary’s Financial Sector: Regulated by EU-Harmonizing Reforms

Overview of the Hungarian Financial Environment

Hungary has implemented comprehensive reforms to align its financial sector with European Union (EU) standards. As a result, Hungary’s financial environment is now conducive to the presence of virtually all capital-related institutions, products, and services.

Key Features of the Hungarian Financial Market

• The Hungarian Forint has been fully convertible for all financial transactions since 2001.
• Both the Hungarian financial market and capital market transactions are fully liberalized.
• The National Bank of Hungary (Magyar Nemzeti Bank – MNB) operates independently from the government.

Regulatory Framework for Credit Institutions

Credit institutions in Hungary, including commercial banks, must be registered with the MNB and adhere to the Financial Enterprises Act. Commercial banks may only operate in Hungary as a company limited by shares or as a branch office of a foreign bank. A minimum initial capital of HUF 2 billion (approximately USD 7 million) is required for establishing a new bank.

Foreign Ownership in the Banking Sector

Foreign professional investors own more than 90% of registered capital in the sector, including 35 commercial banks. However, the Hungarian government has increased its ownership to over 50% of the banking sector through state acquisitions.

Access to Capital and Financial Services

Access to capital remains difficult and limited in Hungary, forcing many small and medium-sized enterprises (SMEs) to rely on self-financing or short-term payment terms from foreign exporters. The largest commercial banks in Hungary offer a range of financial services and operate under the supervision of the MNB.

Payment Methods in Hungary

Payment methods in Hungary include cash, bank cards (Visa, Amex, Mastercard), and wire transfers. Card payments account for approximately 38-40% of retail transactions, while cash withdrawals are three times as big as card payments.

Banking System Structure

The Hungarian banking system is a two-tiered structure with the MNB occupying the first level and credit institutions operating on the second level. The use of automatic teller machines (ATMs) has become increasingly popular in Hungary.

Foreign Exchange Controls and US Presence

There are no foreign exchange controls in place, allowing for free movement of capital into and out of Hungary. US banks have a limited presence in Hungary, with Citi being the only major US bank operating in the country. However, US issued checks cannot be cashed in Hungary.

Conclusion

Overall, Hungary’s financial sector is well-regulated and integrated with EU standards, providing a favorable environment for investment and trade.