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.
In a letter, the prime minister said in response to Demján on Monday that the government had made significant revisions to the banking sector over the past six years. These included repurchasing MKB and Budapest Bank and buying a stake in Erste Bank. He said the restructuring of the savings cooperative sector fits into the same set of measures. The government considers the restructuring of the system complete, Orbán said.
The prime minister, however, said he accepted Demján’s opinion that the system of savings cooperatives should not operate without proper oversight. He also said he agreed with the view that competition in Hungary’s banking system should remain fair.
The bill submitted to parliament on Monday is designed to achieve exactly that, Orbán said.
Varga told a news conference on Monday that the government wants a credit and banking system that remains stable and offers a level playing field in the interests of the economy. Speaking after the bill’s submission, he said proposals include establishing a unified supervisory system. If the amendment is approved, the central bank would be able to monitor the savings system more effectively, he said. The supervisor would not only monitor institutions but would also have the power to intervene in the middle of procedures, he said, adding that the NBH could, for example, order the body overseeing the savings cooperatives to launch a comprehensive investigation if required.