The European Commission has approved, under EU State aid rules, a capital injection worth EUR 2 billion (HUF 760 billion) by Hungary into the Hungarian Development Bank (Magyar Fejlesztési Bank, MFB). The measure will be funded by the Recovery and Resilience Facility (‘RRF’).
The Hungarian measure
Hungary notified to the Commission a capital injection worth EUR 2 billion into MFB. The public funding will be provided through the RRF. The aim is to provide the bank with the capacity to ensure financing in various sectors with market failures, such as infrastructure, agriculture, environmental protection, education, tourism, sports, urban and rural development, and regional convergence.
Hungary’s amended Recovery and Resilience Plan, currently awaiting Council approval, foresees four goals for the capital injection:
- to support MFB’s SME competitiveness programme;
- to support MFB’s capital programme for early-stage growth, innovative companies and SMEs engaged in the green and digital transition;
- to support MFB’s rental housing and student dormitory development programme;
- to co-finance projects with the European Investment Bank to implement the Hungarian Recovery and Resilience Plan.
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The European Commission’s assessment
The Commission assessed the Hungarian measure under EU State aid rules, in particular Article 107(3)(c) of the Treaty on the Functioning of the EU (‘TFEU’), which enables Member States to support the development of certain economic activities under certain conditions.
In particular, the European Commission found that the measure facilitates the development of economic activities, including for infrastructure, agriculture, environmental protection, education, tourism, sports, rural development, regional convergence and urban development. Also, the aid is necessary and appropriate to achieve the objectives pursued. It is proportionate as it is limited to bridging market gaps, so that distortions of competition are minimised.
Furthermore, Hungary has committed to several measures, including the limitation of financial activities to relevant market failures and implementation measures to prevent crowding out of private sector operators. This will ensure that MFB will not undercut private financial institutions active in the Hungarian market. On this basis, the European Commission approved the Hungarian measure under EU State aid rules.
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Background information
According to Article 107(1) TFEU, a measure shall constitute State aid if the following four cumulative conditions are met: firstly, the measure has to be granted by Member States through State resources, secondly, the measure has to confer a selective economic advantage to certain companies, also the advantage has to distort or threaten to distort competition, and the measure has to affect trade between EU Member States.
All measures entailing State aid must be notified to the European Commission for prior approval, unless covered by one of the State aid block exemption rules.
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