Bill would establish full joint liability for savings coops, extend scope of central bank oversight

Budapest, June 6 (MTI) – A bill submitted to parliament by Economy Minister Mihály Varga on Monday would establish full joint liability for Hungary’s integrated savings cooperatives and give the central bank closer oversight of the sector.

The bill was submitted a week after the Hungarian Banking Association’s head, Mihály Patai, complained in a letter to the economy minister that savings cooperatives enjoy a competitive advantage over banks. He said the bank levy is less of burden to savings cooperatives than banks, the cooperatives are not under the sole oversight of the central bank and banks must sometimes fill in to cover savings cooperatives’ liabilities, news weekly HVG reported, citing a copy of the letter it obtained.

In a statement released Monday, the National Bank of Hungary said it agrees with the head of the Hungarian Banking Association that oversight of the country’s savings cooperatives could be improved and that eliminating limits on integrated coops’ joint liability could contribute to banking sector stability and level the playing field.

“At present, the system of oversight, liability and requirements for savings cooperatives is different from that for other credit institutions. If the legislature decides to move further in the direction of uniform financial oversight, the central bank stands ready for the implementation of such a measure,” the NBH said.

In an open letter published last week, Sándor Demján, head of the National Association of Savings Cooperatives (OTSZ), asked Prime Minister Viktor Orbán to review the savings cooperative sector to see if the goals of its integration had been achieved. Demjan said the original goal was to increase the sector’s assets but instead the entire sector had become loss-making.