Here comes the new price cap: the Hungarian government threatens the banks

On Monday, margin regulation on certain food products came into effect in Hungary, and the government was so eager to introduce it that it threatened the banks with similar regulations.

The Hungarian government believes that intervening in certain areas of trade is the way to bring inflation down, which they argue will have a positive effect. However, experts disagree. Economy Minister Márton Nagy is so committed to state intervention that he has already identified the next sector to target.

I will give banks a week or two to reduce bank account fees,” said Márton Nagy, the Minister of National Economy, at a press conference on Monday, according to Népszava. The minister stated that bank account fees have risen drastically, far outpacing even the pass-through of the retail transaction fee, which he considers unacceptable.

The minister has recently warned financial institutions on several occasions that the government will not accept the increase in retail banking fees. A few days ago, he called on the Banking Association and banks to begin discussions on expanding their low-cost basic account systems.

The extent and necessity of the fee increases are indeed debatable. According to data from the Hungarian National Bank (MNB), the total profit of the Hungarian banking system reached 2,007 billion forints last year, a historic record. This suggests that banks’ profitability remains strong in the current situation. Both the government and the central bank are calling for intervention in service pricing. Mihály Varga, the newly appointed central bank president, reiterated this stance last weekend.

It is a clear signal that the government wants to assemble a minimum relief package for families and pensioners. However, he stated that if an agreement with the banks is not reached within a week or two, action will be taken. He added that a price cap could also be applied to bank service charges to curb unjustified price hikes and stabilise costs.

Currently, the government is withdrawing hundreds of billions of forints in profits from financial institutions through special taxes. Last year, it raised transaction fees, which banks have, without exception, passed on to retail customers since January this year.

Under Hungary’s permissive price regulation, banking charges, like telecoms charges, can be increased annually in line with the previous year’s inflation rate.

Banking and service fees were abolished at the beginning of 2023, and since then, annual retail fee increases have ranged between 10–13%. The government has struggled to keep inflation low, and while these state interventions can temporarily curb inflation, they are not a long-term solution. Following the previous price cap period, inflation rebounded due to government intervention.

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Here comes the new price cap: the Hungarian government threatens the banks

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