NBH welcomes ECB opinion on amendment to central bank law

The Hungarian central bank (NBH) has said it welcomed the European Central Bank’s (ECB) positive opinion on the government’s amendment to the law governing the central Bank which would allow the government to spread payments for recapitalising the bank from the central budget over several years in the case of the NBH posting a temporary operating loss.

Citing international examples, the NBH had already argued that central banks can operate effectively with a temporary negative capital balance while credibly fighting inflation, it said in a statement on Monday.

With the agreement and support of the NBH, the finance ministry initiated the amendment of sections of the Central Bank Act with regard to central bank losses with the aim of loosening the law’s strict rules.

After looking to European best-practice for handling negative equity, the bank and government sought the ECB’s opinion regarding its related proposal that should the NBH’s operating capital go into the red temporarily, the government must pay into the central budget, allowing for profits of later years to ensure capital needed in the medium term.

The NBH said the new loss compensation rules would further increase the central bank’s room for maneouver, the MNB said.

Source: MTI