Mnb School

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2013

Annual Report


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Annual Report

2013 BUSINESS REPORT AND

FINANCIAL STATEMENTS OF THEMAGYAR NEMZETI BANK


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Pbished by he Magyar Nemze Bank

Pbisher in charge: Eszer Hergr

Szabadsg r 89., H-1850 Bdapes,

www.mnb.h

ISSN 1585-4604 (nine)


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3ANNuAl REPoRt 2013

Contents

Part A)2013 business report of the Magyar Nemzeti Bank 5

1 The Governors foreword 7

2 A brief overview of the Magyar Nemzeti Bank 10

2.1 objecves and basic asks f he MNB 10

2.2 the bdies and managemen f he MNB 11

2.3 organisan f he MNB 17

2.4 Reans beween he MNB and he Erpean Sysem f Cenra Banks 17

3 Review of the MNBs performance in 2013 20

3.1 Mneary picy 20

3.2 Sabiiy f he nancia inermediary sysem 24

3.3 Financia spervisin and cnsmer precn 28

3.4 Paymen and secries seemen sysems 34

3.5. Managemen f freign exchange reserves 36

3.6 Cash giscs acvies 39

3.7 Sasca service 42

3.8 MNB acvies aimed a imprving he nancia ieracy f cizens 44

3.9 Facrs shaping he cmmnican f he MNB 44

3.10 the MNBs incme in 2013 45

3.11 Financia perfrmance f he MNB 46

3.12 Inrdcn f he ESCB cmmiees 51

3.13 the MNBs research acvies in 2013 53

3.14 Pbicans and cnferences rganised by he MNB in 2013 53

4 Explanation of abbreviations and terms specific to central banking 57


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4 ANNuAl REPoRt 2013

MAGYAR NEMZEtI BANK

Part B)Audited financial statements of the Magyar Nemzeti Bank

1 Independent auditors report 62

2 Balance sheet of the Magyar Nemzeti Bank 64

3 Income statement of the Magyar Nemzeti Bank 65

4 Notes to the financial statements 66

4.1 the MNBs accnng picy 66

4.2 Eecs f macrecnmic rends n he 2013 baance shee and incme saemen f he Magyar Nemze Bank 704.3 Frin receivabes frm he cenra gvernmen 71

4.4 Freign crrency receivabes frm he cenra gvernmen 72

4.5 Frin and freign crrency iabiies f he cenra gvernmen 72

4.6 Ne psins vis--vis he cenra gvernmen 73

4.7 Frin receivabes frm credi insns 73

4.8 Ne psins vis--vis credi insns 74

4.9 Gd and freign exchange reserves f he cenra bank 75

4.10 oher frin and freign crrency receivabes 76

4.11 oher depsis and iabiies 77

4.12 Ne psin vis--vis he IMF 78

4.13 Invesed asses 79

4.14 Impairmen sses and prvisins 84

4.15 Prepaid expenses/accred incme and accred expenses/deferred incme 85

4.16 Changes in eqiy 85

4.17 Revaan reserves 86

4.18 o-baance shee iabiies f he MNB and her signican -baance shee iems 87

4.19 Ne ineres incme and reaised ne incme f nancia perans 89

4.20 Cmpnens f incme frm he revaan f freign exchange hdings 91

4.21 Cs f issing banknes and cins 92

4.22 oher incme/expenses 92

4.23 Incme her han fees and cmmissins 93

4.24 Incme frm spervisry acvies 94

4.25 operang incme and expenses 94

4.26 Infrman n payr and nmber f sa 95

4.27 Disncns beween he ESCB gideine and MNB accnng picy 96


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Part A)

2013 business report of theMagyar Nemze Bank


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1 The Governors foreword

7ANNuAl REPoRt 2013

thrgh 2013, he Mneary Cnci cnned he

easing cyce which had cmmenced in 2012. In he exibe

inan argeng sysem appied by he Magyar Nemze

Bank (hereinaer: MNB), he easing f he mneary sance

was warraned bh by mderae medim-erm inanary

pressres and he eve f ecnmic acviy, which remained

bew is pena. By he end f Jy 2013, he Mneary

Cnci had redced he cenra bank base rae wih 25 basispin rae cs 4 per cen. Hwever, in ine wih he mre

vae gba mney marke senmen bserved in he secnd

haf f he year, he Mneary Cnci hen deceeraed he

rae f he easing cyce in H2, deciding c he base rae by

20 basis pins n ve ccasins. As a res, he main picy

rae decined 3 per cen by he end f 2013. Cnsmer

price inan as decined, and apar frm he rs mnh f

he year, i sayed bew he 3 per cen medim-erm arge

hrgh he year, faing side f he (rerspecvey

accepabe) 31 per cen erance band aer Q1. Average

anna inan was 1.7 per cen in 2013.

In rder faciiae he abiiy f sma and medim-sized

enerprises (hereinaer: SMEs) access credi and

srenghen nancia sabiiy, he MNB annnced he Fnding

fr Grwh Scheme (hereinaer: FGS) in Apri 2013. In Piar I

and II f he FGS, he MNB prvides renancing ans wih a

0 per cen ineres rae credi insns, which may se

he faciiy exend ans SMEs wih a maximm ineres

rae margin f 2.5 per cen and a maximm mariy f 10

years. In he rs phase f he prgramme which ased n

30 Sepember 2013, f he HuF 750 biin avaiabe a a f

neary HuF 701 biin was disbrsed SMEs, crrespnding isan f 93.5 per cen. ths, he prgramme had a

signican impac n he acviy f ecnmic agens bh

n he demand side and n he sppy side. I shd be

emphasised ha new invesmen ans accn fr mre han

60 per cen f he ans disbrsed in Piar I f he FGS, which

is benecia in respec f he prgrammes impac n grwh.

the ans disbrsed by credi insns in Piar II were as

primariy sed renance invesmen ans. Renancing f

freign crrency ans redced he SME secrs expsre

exchange rae risks, hereby migang he assciaed sabiiy

risks. In view f he sccess f he FGS, he Mneary Cnci

decided cnne he prgramme frm 1 ocber 2013

n he end f 2014 wih an inia fnding vme f HuF

500 biin, which may be raised by he Mneary Cnci p

HuF 2,000 biin, depending n macrecnmic, mney

marke and ending devepmens.

the freign crrency iqidiy prbems prevaiing in he frinFX swap marke sared ease in 2013. Pary wing his

devepmen, he banking secrs demand fr radina

cenra bank FX swap ransacns decined cmpared he

previs years. A he same me, he MNB inrdced new FX

swap enders nder Piar III f he FGS, which were inended

redce Hngarys vnerabiiy and migae he insns

ineres rae risk. As a res f he new enders, he pri

f sanding cenra bank swap cnracs increased in 2013.

the new MNB Ac enering in frce n 1 ocber 2013

inegraed nancia spervisin and cnsmer precn

fncns in he cenra bank, and vesed he MNB wihmacrprdena pwers and resn fncns. In he new,

inegraed rganisan, he decisin-making srcre was

as ransfrmed, and a Financia Sabiiy Cnci was se p

discss micr and macrprdena isses.

As sa, he Magyar Nemze Bank issed is Report on

Financial Stability wice in 2013, in which i pbished anayses

regarding he risks jepardising he smh fncning f he

nancia inermediary sysem. In rder ensre he sabiiy

f he nancia inermediary sysem, he MNB cnnsy

expres and presens he risks jepardising sabiiy andparcipaes in he prevenn f sysemic risks and in he

migan r eiminan f exisng risks. the shck-absrbing

capaciy f he Hngarian banking secr is adeqae bh frm

he perspecve f iqidiy and capia adeqacy. the marked

prcycicaiy f he nancia sysem cnned mderae in

2013, b he ending acviy f dmesc nancia insns

is s n scien adeqaey sppr ecnmic grwh.

Prcycicaiy, which has been idened by he MNB as a

majr risk, has decined, primariy de he MNBs rae-

cng cyce and he FGS.


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MAGYAR NEMZEtI BANK

A is sessin n 16 Sepember 2013, he Pariamen

adped he dra egisan n he Magyar Nemze Bank1

which decided inegrae he nancia marke spervisin

fncn in he cenra bank. Having drawn cncsins frm

he nancia crisis, wih his Ac he egisar creaed a cenra

bank which, wihin he framewrk f a singe insn,garanees he sabiiy f he nancia sysem and he

fncning f individa nancia insns. the negave

repercssins f he nancia crisis in Hngary and he bes

pracces f severa Eu Member Saes have bh demnsraed

ha he harmny beween macr and micr eve spervisin

is indispensabe fr he prevenn and resn f individa

r sysemic nancia crises. As a res f his inegran, he

MNB acqired a cmprehensive infrman base peraining

individa insns, which imprved he cndins fr

macr-eve decisin-preparan and resved he previs

cnradicns srrnding regary acns aken vis--vishe nancia inermediary sysem. Wih he cmprehensive

se f insrmens avaiabe he MNB, he idencan,

prevenn, mniring and cnr f he sysemic risk

facrs hreaening he sabiiy f he nancia sysem and

he individa risks f specic insns have becme mre

harmnised and hs mre ecien. Aer he new MNB

Ac enered in frce, in he cnex f is micrprdena

regary asks, he MNB primariy wrked n deveping

and caibrang he new se f insrmens beswed pn

i by he aw, and hs macrprdena aspecs were as

dy cnsidered dring he appican f micrprdena

srveiance.

the sraegic bjecves f he MNBs prfessina area

respnsibe fr he spervisin f nancia rganisans

and cnsmer precn are in ine wih he asks f he

cenra bank as a whe. the inegran f cenra bank and

spervisry acvies did n case any disrbances in daiy

spervisin; indeed, he eciency f spervisry acvies has

imprved. As a res, he area f spervisin has aken an

impran sep, even in he shr erm, wards is sraegic

bjecve: he esabishmen f an ahriy acknwedged

and recgnised in he spervisry cmmniy f he Erpeanunin, which everages he synergies semming frm he

inegran and is capabe f shaping he nancia sysem

sysemacay and ecieny. A he same me, he inegran

f he spervisry area prvides an pprniy review

and reinfrce he se f insrmens inended spervise

he enre sysem f nancia inermedian, incding

mney, capia, insrance and fnd markes. this incdes

he asks f addressing prdena chaenges reaed he

credi insn secr, he devepmen f a mehdgy

ensring qick, rese and ecien spervisin ha is as

capabe f respnding exiby pena negave rends,

and he ecien managemen f new asks emerging in

Hngarian ega pracce and spervisry respnsibiies. As

regards marke spervisin, key asks incde he inrdcn

f faser and mre exibe eary inervenn pracces and

harmnisan f he wrk f a ahries cperang wih

ne anher in he area f marke spervisin. In he edf cnsmer precn, he cenra bank expecs marke

parcipans n ny cmpy wih he eer f he aw, b

as respec he aspecs f fair service prvider cndc;

indeed, he MNB inends ake seps srenghen his

ade. Cnsmer precn regans are being reviewed

and a mre sringen sancning picy is being deveped

wih a view precng cnsmers ineress.

In 2013, he MNB iniaed and seered impran changes in

rean he devepmen and regan f he dmesc

paymen sysem and he spervisin f paymen andseemen sysems. on he devepmen and regary side,

egisan has been adped regae ca crrencies and

inerbank fees charged n card ransacns have been sbjec

sary redcn; in addin, he MNB has anched a

new sasca pbican presenng he ms impran daa

n dmesc paymens. As regards acvies reaed he

versigh f paymen and seemen sysems, newrhy

devepmens incde ha preparans have sared fr

he incsin f he frin in a ClS seemen and paymen

mde, and ha he re-icensing prcess f KElER Cenra

Cnerpary ld. has begn ang wih he designan f

he sysems peraed by he cmpany in rder ensrecmpiance wih he reevan Erpean unin regan. In

2013, he MNB cndced paymen inspecns a 19 credi

insns and impsed penaes in he amn f HuF 19.1

miin in a.

the amn f cia freign exchange reserves did n

change naby dring he year and sd a EuR 33.8

biin a he end f 2013. the primary reasn behind he

decine in freign exchange reserves dring he year ies in

he gvernmen deb reaed paymens f deb; hwever,

hese paymens were ams enrey se by EuR ransfersfrm he Erpean Cmmissin and by bnd isses f he

Gvernmen Deb Managemen Agency.

A he end f 2013, he a vae f crrency in circan

amned HuF 3,189 biin, represenng a 17 per cen

year-n-year increase. the increase in he sck f crrency

in circan was bserved acrss a denminans, b

mainy invved he w arges denminans. In 2013, he

MNB perfrmed cash ransacns fr is csmers, credi

insns and he Hngarian Ps oce wih a vae f HuF

3,248 biin.

1Ac CCVIII f 2013 n he Magyar Nemze Bank.


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tHE GoVERNoRS FoREWoRD

9ANNuAl REPoRt 2013

the cnerfeing f frin banknes remained in ine wih

he rends f recen years. the 2,448 cnerfei banknes

wihdrawn frm circan as year reec a decine f 8

per cen cmpared he previs year. Ms cnerfei

frin banknes were nce again fnd amng 10,000

and 20,000-frin nes, accnng fr 81.5 per cen f acnerfeis.

As a res f he inegran f he spervisry fncns

exercised ver he nancia inermediary sysem as a whe

in he rganisana srcre f he MNB ang wih he

reevan cmpeences, he sasca acviy f he MNB

expanded incde spervisry sasca asks. In he crse

f 2013 w signican prjecs were anched, aimed a he

harmnisan and inegran f sasca and spervisry

daa cecn and, ver he ng erm, he devepmen

f a mdern, Erpean qaiy new daa cecn mdeand he inegran f infrman sysems f sasca and

spervisry prpses. In ine wih her Erpean unin

Member Saes, he baance f paymens and nancia

accns sascs f he MNB wi reec he changes

semming frm he cmprehensive revisin f inernana

mehdgica sandards frm he smmer f 2014. As in

previs years, in 2013 preparans fr he appican f

new mehdgica sandards payed an impran re in

he sasca acviy f he MNB.

In 2013, he MNB recrded a pr f HuF 26.3 biin,

represenng an imprvemen f HuF 66.1 biin cmpared he sses incrred in 2012. this favrabe res can be

mainy aribed he decine in ineres sses wing he

decine in he cenra bank base rae n he ne hand, and

he increase in he pr frm exchange rae changes n

he her hand. the wer incme frm nancia perans

reecs devepmens in freign exchange marke yieds.

In 2013, he perang css f he MNB amned HuF

14.4 biin, aeced primariy by he MNBs inegran

wih he HFSA frm 1 ocber 2013. the inegran exered

pward pressre n css, which was manifesed primariy insa css, wing he arger wrkfrce (a sasca sa

nmber increase f 502 persns) and he reaed empymen

erminan css ang wih heir cnribn impicans.

overhead css as increased, abei a esser degree,

mainy as a res f he easing and perang expendires

f he rena prpery n Kriszna kr (he frmer HFSA

biding) in Q4.

the vae f invesmen impemened in 2013 amned

neary HuF 565 miin, which is cnsideraby wer han he

gre recrded fr he previs year. the main reasn fr

he decine is he cancean f cerain panned invesmen

prjecs in he cnex f he fre renvan f he main

ces. the vae f invesmen spending in 2013 was as

inenced by he fac ha, as a res f ers achieve

wer prices, severa asses were prchased a a price wer

han riginay panned. Ms f he prjecs impemened

invved It devepmen, inked, amng her hings,

he mehdgica changes aimed a cmpiance wihinernana sasca reprng bigans.

the MNBs envirnmenay cnscis perans cnned

imprve in 2013, and as a res f a sccessf exerna

adi, he cenra bank renewed is EMAS cercan. the rs

hree-year cyce f he MNBs envirnmena managemen

sysem (KVHIR) ended in 2013, and he MNB has made

preparans fr a cmprehensive review f he sysem. the

cmmimens nderaken fr 2013 were reaised; he main

ces and he bidings f he lgisca Cenre bained

an inernana envirnmena cercan (BREEAM In-use). obaining he cercan fr he main ce is niqe

in Hngary where n her biding sbjec mnmen

cnservan has he same qaican. In he cnex f he

inegran, he migran f he envirnmena managemen

sysem he new sie is in prgress. In he perid 2014

2016, he envirnmena sraegy wi fcs n cnning

he envirnmenay cnscis devepmen f he MNBs

bidings and he cash sppy chain.

one f he primary bjecves f he MNB is cnribe,

in sppr f is sary des, imprving he nancia

ieracy f cizens. t ha end, ver he years i has rganisednmers prgrammes fr he ppan in parcar, fr

ynger generans fcsed n shaping nancia ades

and awareness. the cenra bank, as an insn wih

prfessina experse enjying pbic credibiiy, srives

f an iniave, crdinang and eading re in sciey-

wide prgrammes geared ward he devepmen f

nancia ieracy and wih ha in mind, i cperaes wih

he pbic, civiian and prfessina rganisans cmmied

and wih a vesed ineres in he nancia awareness

f he ppan.

In 2013, he cmmnicans f he MNB were deermined

by he fndamena persnne, insna, rganisana

and adina changes which, vera, resed in a

rejvenaed, mre dynamic exerna image. Pririy was

given measres and asks faciiang mre ecien

cenra bank perans and ecnmic grwh, and hse

serving he ineress f he sciey a arge. By seecng he

apprpriae cmmnican s, he prfessina acviy

f he cenra bank was cmmnicaed he pbic in a

scheded and mre argeed manner han befre. the

dmesc and inernana reanships f he new cenra

bank managemen nderwen a ransfrman bringing

ab qaiy changes.


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Company name:Magyar Nemze Bank

Registered oce:1054 Bdapes, Szabadsg r 89.

Form of operaon: cmpany imied by shares. the frm f

peran, i.e. he designan cmpany imied by shares r

is abbrevian need n be incded in he cmpany name

f he Magyar Nemze Bank.

Year of foundaon: 1924

Owner (shareholder): he Hngarian Sae, represened by

he miniser in charge f pbic nances

Scope of acvies:as dened by Ac CXXXIX f 2013 n he

Magyar Nemze Bank (hereinaer: MNB Ac)

Subscribed capital: HuF 10 biin

2.1 OBJECTIVES AND BASIC TASKS OFTHE MNB

the Magyar Nemze Bank (hereinaer: MNB, he cenra

bank) is a ega eny perang as a specia cmpany imied

by shares, which cndcs is perans in accrdance wih

he prvisins f he MNB Ac. Prsan he MNB Ac

enering in frce n 1 ocber 2013, he basic asks and

her respnsibiies f he MNB have been expanded.

Repacing is frmer cenra bank respnsibiiy f spprng

he crean and enfrcemen f a picy aimed a ensring

he sabiiy f he sysem f nancia inermedian, as f1 ocber 2013 he MNB assmed he re f an ahriy

ha shapes he primary macrprdena picy f Hngary.

Mrever, wih he eiminan f he Hngarian Financia

Spervisry Ahriy he independen bdy spervising

he sysem f nancia inermedian as f 1 ocber 2013,

he asks f he HFSA were assmed by he MNB, incding he

spervisin f he sysem f nancia inermedian and he

peran f he Financia Arbiran Bard. In addin, as

par f is respnsibiies, he MNB prceeds as a resn

ahriy.

In ine wih is respnsibiies se frh in he MNB Ac,

besides being a member f he Erpean Sysem f Cenra

Banks, as f 1 ocber 2013 he Magyar Nemze Bank is as

a member f he Erpean Sysem f Financia Spervisin.

Wih regard is membership f he aer insn, he

MNB carries he asks arising frm he scpe f he

Erpean Banking Ahriy, he Erpean Insrance and

occpana Pensins Ahriy, he Erpean Secries

and Markes Ahriy and prsan he MNB Ac as f

is enry in frce he Erpean Sysemic Risk Bard.

In accrdance wih Arce 127 f he treay n he

Fncning f he Erpean unin, he MNB Ac which

esabishes he MNBs primary bjecves and basic asks as

we as is insna, perana, persnne and nancia

independence and peran spaes ha he primary

bjecve f he MNB is achieve and mainain price sabiiy.

Wih prejdice is primary bjecve, he MNB spprs

he mainenance f he sabiiy f he sysem f nancia

inermedian, he enhancemen f is resiience and is

ssainabe cnribn ecnmic grwh, and he MNB

sha sppr he ecnmic picy f he gvernmen singhe insrmens a is dispsa.

the MNB Ac as spaes he independence f he cenra bank

in accrdance wih Arce 130 f he treay n he Fncning f

he Erpean unin. on he basis f cenra bank independence,

he MNB and he members f is bdies sha be independen in

carrying heir asks and meeng heir bigans cnferred

pn hem by he MNB Ac, and sha neiher seek nr ake

insrcns frm he Gvernmen, he insns, bdies and

ces f he Erpean unin, he gvernmens f is Member

Saes r any her rganisans r pica pares, excepfrm he Erpean Cenra Bank and as reqired based n is

membership in he Erpean Sysem f Financia Spervisrs.

the Gvernmen r any her rganisan sha adhere his

principe, and sha n aemp inence he MNB r any

member f is bdies in he crse f perfrmance f heir asks.

The basic tasks of the MNB are the following:

i denes and impemens mneary picy;

i has he excsive righ isse banknes and cins, incding

cmmemrave banknes and cins, in he cia crrency

f Hngary;

2 A brief overview of the MagyarNemze Bank


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i has he excsive righ hd and manage cia

reserves in freign exchange and gd, in rder preserve

he exerna sabiiy f he Hngarian ecnmy;

i has he excsive righ cndc freign exchange

perans in rean he managemen f freignexchange reserves and he impemenan f he exchange

rae picy;

i has he excsive righ versee he dmesc paymen

and seemen sysems as we as he secries seemen

sysems and, as par f his versigh dy, mnirs

he peran f he sysem and he peran f he

rganisan perfrming cenra cnerpary acvies in

rder ensre he snd and ecien peran f hese

sysems and he smh circan f mney. Wihin he

scpe f is pwers se frh in he MNB Ac, i parcipaesin he devepmen f paymen and secries seemen

sysems;

i cecs and pbishes he sasca infrman reqired

fr carrying is asks and fing is sasca reprng

bigans ward he Erpean Cenra Bank as dened in

Arce 5 f Prc (N 4) n he Sae f he Erpean

Sysem f Cenra Banks and f he Erpean Cenra Bank

aached he treay n he Fncning f he Erpean

unin;

i esabishes he macrprdena picy fr he sabiiyf he enre sysem f nancia inermedian, wih

he bjecve f enhancing he resiience f he sysem

f nancia inermedian and ensring is ssainabe

cnribn ecnmic grwh. t ha end and wihin he

imis specied in his Ac, he MNB expres he bsiness

and ecnmic risks hreaening he sysem f nancia

inermedian as a whe, prmes he prevenn f

he devepmen f sysemic risks and he redcn

r eiminan f sysemic risks which have evved;

frhermre, in he even f disrbances he credi

marke i cnribes he baanced impemenan fhe fncn f he sysem f inermedian in nancing

he ecnmy by smang ending and by resraining

ending in he even f excessive credi w.

Tasks of the MNB beyond its basic tasks:

i acs as a resn ahriy;

acng as a se spervisr f he sysem f nancia

inermedian, i:

- ensres he smh, ransparen and ecien

fncning f he sysem f nancia inermedian;

A BRIEF oVERVIEW oF tHE MAGYAR NEMZEtI BANK

11ANNuAl REPoRt 2013

- faciiaes he prden peran f he persns and

rganisans frming par f he sysem f nancia

inermedian and spervises he prden exercise f

wners righs;

- discvers ndesirabe bsiness and ecnmic risks individa nancia rganisans r individa secrs

heref, redcing r eiminang specic r secra

risks which have evved, and aking prevenve

measres ensre he prden peran f

individa nancia rganisans;

- precs he ineress f hse sing he services

prvided by nancia insns and srenghens

pbic cndence in he sysem f nancia

inermedian.

via he Financia Arbiran Bard, i heps see

f cr dispes arising frm he esabishmen and

perfrmance f he ega reanship esabished beween

he cnsmer and he rganisans f he sysem f

nancia inermedian in respec f he se f services.

Any frher asks f he MNB sha be dened by aw and,

in rean he spervisin f he sysem f nancia

inermedian, by ega regans adped prsan he

ahrisan f he ac. Sch asks f he MNB sha cmpy

wih he basic asks and respnsibiies f he MNB as dened

in he MNB Ac.

2.2 THE BODIES AND MANAGEMENTOF THE MNB

the MNB peraes as a ega eny in he frm f singe-

member cmpany f imied by shares. the genera res

peraining cmpanies imied by shares, namey he

prvisins f Ac n Bsiness Asscians appy he MNB,

wih de cnsideran fr he dergans se frh in he

MNB Ac.

the Hngarian Sae as sharehder is represened by he

miniser in charge f pbic nances. the MNB peraes

wih a Genera Meeng.

the shareholder is ened pass decisins, by way f

a sharehders resn, n he esabishmen f an

amendmen he Saes as we as he appinmen,

dismissa and remneran f he adir.

As a garanee f independence, cnrary he pracce

f her cmpanies imied by shares, he remneran f


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16/102


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18/102


MAGYAR NEMZEtI BANK

Members of the Supervisory Board of the Magyar Nemze Bank

le righ: Gbr orbn, Dr Per Rna, Isvn Varga, lsz Madarsz, Zsigmnd Jrai (Chairman), Dr Gbr Andrs Sznyei, Dr tams Kana,Dr Aa Simn th.

resn. Prir png frward a prpsa fr he

appinmen r dismissa f he MNBs adir, he Gvernr

f he MNB cnss wih he Presiden f he Sae Adi

oce.

the Supervisory Board is he bdy respnsibe fr he

cnns spervisin f he MNB n behaf f he wner.

the spervisry cmpeence f he Spervisry Barddened by he MNB Ac des n cver he spervisin f

he Banks perfrmance f is basic asks, is acns as a

resn ahriy and is spervisry acviy in respec

f he nancia inermediary sysem, r he impac f he

afremenned n he MNBs pr and ss. Accrdingy, he

Spervisry Bard cmpies he repr reqired by he Ac n

Bsiness Asscians n he anna accns as specied in

he Ac n Accnng sbjec he abve imians.

the members f he Spervisry Bard dened in he MNB Ac

2 Since, prsan Arce 67(1) f Ac CCVIII f 2011, he enry in frce f he Ac did n aec he mandae f he members f he SpervisryBard prsan Arce 52/A(4) f Ac lVIII f 2001 n he Magyar Nemze Bank, he mandae f he members eeced by he Pariamen asremained in eec.

are is Chairpersn eeced by he Pariamen, hree addina

members eeced by he Pariamen, he represenave f

he miniser respnsibe fr he sae bdge and an exper

appined by he miniser respnsibe fr he sae bdge.

the Chairman f he Spervisry Bard, wh is eeced by he

Pariamen, is nminaed by he gverning pares, whereas

he her members eeced by he Pariamen are nminaed

by he pariamenary grps.

the members erm f ce cincides wih he mandae f

he Pariamen.

In 2013, he members f he Spervisry Bard f he MNB

were:2

Zsigmnd Jrai, Chairman,

Dr tams Kana,

lsz Madarsz,


19/102


bdy f he ECB is he Genera Cnci, which is respnsibe

fr mainaining an insna reanship beween he

Ersysem and he cenra banks f nn-er area Member

Saes. the Genera Cnci hds is meengs qarery

and cnsiss f he Presiden and he Vice-Presiden f he

Erpean Cenra Bank and he respecve gvernrs f hecenra banks f a Eu Member Saes. the key respnsibiies

f he Genera Cnci incde cnsancy cncerning

preparans fr accessin he er area, apprva f

he cnvergence reprs f he ECB and mniring he

fncning f ERM II. Wihin he framewrk f he aer

acviy, i assesses he ssainabiiy f he biaera exchange

rae f nn-er crrencies parcipang in ERM II agains he

er and prvides a frm fr he aignmen f mneary and

exchange rae picies and he managemen f inervenn

and nancing mechanisms in ERM II. In addin, he Genera

Cnci is invved in verifying wheher he cenra banks fEu Member Saes and he ECB cmpy wih he prhibin

f mneary nancing f he bdge and privieged access f

he pbic secr nancia insns. the Genera Cnci

as cnribes he ECBs advisry fncns and he

cecn f sasca infrman; i ms be cnsed in

respec f any changes in he res f accnng and nancia

daa sppy, as we as isses reaed he adjsmen f he

keys fr sbscripns he ECBs capia. the mandae f

he Genera Cnci wi expire n he dae when a f he

Member Saes have adped he er.

As a res f Craas accessin he Eu in Jy 2013, henmber f ESCB members rse frm 27 28. In 2013, he

nmber f er-area Member Saes did n change, b n 9

Jy 2013 he Cnci f he Eu apprved lavias enry he

er area, resng in an increase in he nmber f er-area

Member Saes frm 17 18 as f 1 Janary 2014.

the ESCB members are as he wners f he ECB. the

respecve wnership shares f Member Saes are deermined

accrding heir shares in GDP and a ppan f he

Eu (n he basis f sasca daa cmpied by he Erpean

Cmmissin). As f 1 Jy 2013, he paid-p capia f he ECBincreased frm EuR 10.76 biin EuR 10.825 biin.

Crreny, er-area cenra banks sbscribe 70 per cen

f he ECBs capia, whie he remaining 30 per cen is

divided amng he cenra banks f nn-er area Member

Saes. these aer cenra banks pay a pre-dened minimm

percenage f heir respecve sbscripns he ECBs

capia as a cnribn he perana css f he ECB

which are incrred in cnnecn wih heir ESCB membership.

Wih eec frm 29 December 2010, his cnribn was

dened as 3.75 per cen f he respecve sbscripns

(previsy i had been 7 per cen). As se frh in he Sae

f he ESCB and f he ECB, he capia keys are adjsed every

Dr Per Rna,

Dr Gbr Andrs Sznyei,

Isvn Varga,

Dnie Paai (represenave f he miniser respnsibe

fr he sae bdge) n 10 March 2013,

Gbr orbn (represenave f he miniser respnsibe frhe sae bdge) frm 4 May 2013,

Dr Csaba Kandrcs (exper appined by he miniser

respnsibe fr he sae bdge) n 3 May 2013,

Dr Aa Simn th (exper appined by he miniser

respnsibe fr he sae bdge) frm 1 Sepember 2013.

2.3 ORGANISATION OF THE MNB

Prsan he Saes f he MNB enering in frce n 4

March 2013, he Execve Bard decided n he inrdcn

f a new perana gvernance mde as f 9 March 2013. thereview f rganisana sns and based n perana

experiences he pmisan f he prcesses k pace

n 1 Jy 2013, when he Execve Bard renewed and, a

signican degree, ransfrmed he rganisana srcre

f he MNB. the perana prcedres deveped a ha

me cnsed he basis fr an addina resrcring

which was necessiaed by he enry in frce f he MNB

Ac n 1 ocber 2013, in he cnex f which he Execve

Bard esabished he ms impran perana res f he

inegraed rganisan, he srcre f he rganisan, he

divisin f abr beween he rganisana nis and by

mdifying he exisng asks and respnsibiies f he depygvernr psin dened he new scpe f cmpeence f

he depy gvernrs.

Based n he rganisana srcre f he MNB as a

31 December 2013, he MNB had 30 rganisana nis

spervised by he Gvernr, he hree Depy Gvernrs, he

Direcr Genera and he Execve Direcrs reprng hem.

the rganisana srcre as a 31 December 2013 is shwn

in he fwing organisaon chart.

2.4 RELATIONS BETWEEN THE MNBAND THE EUROPEAN SYSTEM OFCENTRAL BANKS

Hngarys accessin he Erpean unin as enaied he

MNBs membership in he Erpean Sysem f Cenra Banks

(ESCB). the ESCB cmprises he Erpean Cenra Bank (ECB),

which was esabished in Jne 1998 wih is sea in Frankfr,

and he nana cenra banks f he Eu Member Saes. Is

gverning bdies are he Execve Bard and he Gverning

Cnci, he aer cnsisng f he members f he ECBs

Execve Bard and he gvernrs f he cenra banks f

he er-area Member Saes. the hird decisin-making



20/102


21/102

Organisaon Chart

Organisaon Chart of Magyar Nemze Bank31 December 2013




22/102

3.1 MONETARY POLICY

In 2013, he Mneary Cnci cnned he easing cyce

which had cmmenced in 2012. In he exibe inan

argeng sysem appied by he MNB, easing he mneary

sance was warraned by mderae medim-erm inanarypressres and he eve f ecnmic acviy, which remained

bew is pena. leading gba cenra banks mainained

excepnay se mneary cndins, which was reeced

in he risk assessmen f dmesc nancia insrmens,

widening he scpe fr mneary picy manevre.

In he pinin f he Mneary Cnci, p remained bew

pena hrgh 2013, and nempymen exceeded he

ng-erm eve deermined by srcra facrs. In ine wih

he assessmen f he Mneary Cnci, as he cs shcks

experienced in 2012 faded, he disinanary impac f

weak demand was increasingy perceivabe, which was asreeced in nderying inan rends. Firms had imied

pprnies price in he previs increases in prdcn

css. these facrs and gvernmen measres aimed a he

redcn f adminisered prices pshed inan bew he 3

per cen arge by he beginning f 2013, and he inan rae

cnned decine frher dring he year. In he jdgemen

f he Mneary Cnci, agains he backdrp f a cnning

weak demand envirnmen, inanary pressre was ikey

remain mderae even aer he dissipan f ransina

shcks. In view f he abve facrs and as in cnsideran

f he graday imprving risk assessmen f Hngary,achieving he medim-erm inan arge in 2013 jsed

mainaining he cas easing f mneary picy. By he

end f Jy 2013, in 25-basis pin rae cs, he Mneary

Cnci had redced he cenra bank base rae 4 per cen.

Gba mney marke senmen, hwever, became mre

vae in he secnd haf f he year, mainy de

increased ncerainy ab he fre f he qanave

easing prgrammes f eading gba cenra banks. In is

cmmnicans, he Mneary Cnci indicaed ha he

mre fragie inernana envirnmen warraned increased

can and accrdingy, in Ags i decided cnne he

cng cyce f he cenra bank base rae in mre cas,

20-basis pin seps. In he secnd haf f he year, n ve

ccasins he Mneary Cnci decided redce he main

picy rae by 20 basis pins, bringing dwn he rae 3

per cen. In December, he Mneary Cnci indicaed ha,

based n he aes Repr n Inan, frher picy easing

was ikey be reqired in rder achieve medim-ermprice sabiiy. the gba nancia envirnmen, hwever,

was deemed be vae. In cnsideran f his, as we

as devepmens in Hngarys risk assessmen and he

imprvemen in ecnmic grwh, decisin-makers expressed

ha frher ineres rae cs cd n be red , b hey

as indicaed ha swing dwn he pace f redcns may

be warraned in he fre.

Achievement of the inaon target in 2013

In he assessmen f he Mneary Cnci, inan rends in

2013 nderwen marked changes cmpared he previsperid. Cnsmer price inan decined signicany: apar

frm he rs mnh f he year, i remained bew he 3 per

cen medim-erm arge hrgh he year, faing side

3 Review of the MNBs performancein 2013

Chart 1

The inaon target and inaon developments since theseng of the connuous target

Source: HCSO, MNB.

10

9

8

7

6

5

4

3

2

1

0

2007 2008 2009 2010 2011 2012 2013

10

9

8

7

6

5

4

3

2

1

0

Per cen Per cen

Cnsmer price index

Inan arge



23/102

In he secnd haf f he year, even he cenra banks

indicars capring nderying inan rends pined

hisricay w dynamics as he cmbined res f faing

exerna marke price pressres, decining cmmdiy prices

and he grada adjsmen f inan expecans, in

addin he signican nderisan f capacies and

sbded dmesc demand. t a cnsiderabe degree, he

regaed price redcns carried in severa seps dring

he year as cnribed he evn f a w inan

envirnmen. owing he se abr marke cndins

and decining inan expecans, wage dynamics were

sbded. the price dynamics f marke services acceeraedsmewha in H2, mainy de he nancia ransacn evy,

which raised he price index f banking services.

lking ahead, inanary pressres are ikey remain

med ver he medim erm. As he inan redcing

eec f adminisered prices fades, he cnsmer price index

increase is expeced mve in ine wih he arge by he

end f he hrizn reevan fr mneary picy. the Mneary

Cnci wi cnne cndc is mneary picy ensre

ha he grwh rae f cnsmer prices is cnsisen wih he

inan arge ver he medim erm. over he ng erm,mneary picy can bes cnribe ecnmic grwh and

a predicabe macrecnmic envirnmen by achieving and

mainaining price sabiiy and by ensring he sabiiy f he

nancia sysem.

Changes in monetary policy instruments

First phase of the Funding for Growth Scheme

successfully concluded

the MNB annnced he Fnding fr Grwh Scheme (FGS)

in Apri 2013. the prgramme is inended faciiae he

access f sma and medim sized enerprises (SMEs)

Table 1The consumer price index and its components

(percentage change, year-on-year)

2011 2012 20132013

Q1 Q2 Q3 Q4

Cre inan 2.7 5.1 3.3 3.6 3.2 3.1 3.5

unprcessed fd 4.3 6.8 6.1 10.7 9.6 4.7 -0.7

Fe and marke energy 13.8 11.9 -0.9 2.1 -3.0 -0.6 -2.3

Regaed prices 4.0 4.7 -3.7 -1.1 -2.8 -4.0 -6.8

Cnsmer price index 3.9 5.7 1.7 2.9 1.8 1.5 0.8

Cnsmer price index excding indirecaxes 3.8 3.5 1.2 2.1 1.2 1.1 0.4

Note: In the case of price indices with unchanged tax content, the CSO adjusts the consumer price index for the technical eect of changes in indirecttaxes. The me series of certain inaon groups may dier, even retroacvely, from those published in earlier years due to the reclassicaon of some

paral items at the beginning of 2012.Source: HCSO.

f he (rerspecvey accepabe) 1 per cen erance band

aer Q1, wih average anna inan sanding a 1.7 per

cen in 2013.

the inan rae, which was signicany wer han he

inan arge in 2013, was he ne res f severa facrs.

the deceeran in he grwh rae f cnsmer prices

bserved a he beginning f he year resed primariy frm

he VAt increase f Janary 2012 drpping f he basis and

a 10-per cen decine in regaed energy prices; in addin,

he disinanary impac f weak inerna demand was as

a cnribr. the inan rae cnned decrease dringhe spring, mainy wing favrabe cs shcks and he

price-redcing eec f he demand envirnmen. As here

was ie rm fr price increases in he weak demand

envirnmen, crprans primariy aemped resre

prabiiy by resraining abr css.

Chart 2

Trend inaon indicators

Source: MNB.

6

5

4

3

2

1

02005 2006 2007 2008 2009 2010 2011 2012 2013

Scky price inanCre inan excding indirec ax eec

Demand sensive inan

6

5

4

3

2

1

0

Per cen Per cen

REVIEW oF tHE MNBS PERFoRMANCE IN 2013



24/102

credi and srenghen nancia sabiiy. In he Mneary

Cncis jdgemen, dring he nancia and ecnmic

crisis he chances f cmpanies access credi deeriraed

signicany, especiay in he case f sma and medim-

sized enerprises, which face even greaer dices when

rying nd aernave srces f nance. In Piar I and IIf he FGS, he MNB prvided renancing ans wih a 0 per

cen ineres rae credi insns, which were expeced

se he faciiy exend ans SMEs wih a maximm

ineres rae margin f 2.5 per cen and a maximm mariy

f 10 years.

A he me f he annncemen, he rigina avaiabe vera

amn envisaged fr he rs w piars f he prgramme

was HuF 500 biin. Fwing he annncemen,

crprans expressed enrms ineres in he ans

avaiabe nder he Scheme, which was as reeced in heparcipan appican rae f credi insns regisered

a he end f May. In rder make w-ineres ans

avaiabe as many SMEs as pssibe in he FGS, even befre

he anch f he Scheme, he Mneary Cnci increased

he imi amn f he faciiy by 50 per cen HuF 750

biin. the riginay annnced avaiabiiy perid f he

prgramme was beween he beginning f Jne he end

f Ags 2013; hwever, in he case f invesmen ans

cmpanies have an addina 6-mnh perid draw dwn

p maximm 70 per cen f he cnrac amn. In view f

he increased demand fr Piar I aer cmmencemen f he

prgramme, n 1 Ags 2013 he Mneary Cnci enabedcredi insns se heir credi ine acaed nder Piar

II wihin he framewrk f Piar I imprve he eecve se

f he vera amn, and exended he disbrsemen perid

by ne mnh. of he HuF 750 biin avaiabe nder he

FGS, credi insns disbrsed a a f neary HuF 701

biin SMEs, crrespnding a isan rae f 93.5 per

cen. Cnracs amnng a a HuF 472 biin and HuF

229 biin were exended in Piar I and Piar II, respecvey,

crrespnding isan raes f 111 per cen and mre

han 70 per cen, respecvey. the ra f new ans,

especiay new invesmen ans, was high in Piar I, whichpins a favrabe grwh eec.

In view f he sccess f he rs phase f he Scheme, n

11 Sepember 2013 he Mneary Cnci f he MNB

decided cnne he FGS. the secnd phase f he

prgramme cmmenced a he beginning f ocber 2013,

wih SMEs abe appy fr ans n he end f 2014.

Credi insns had fnds avaiabe p heir sanding

ans SMEs as a 30 Sepember 2013, b in cnras

he rs phase, his was n based n an inia acan b

raher accrding he an cnracs cncded wih SMEs,

n a rs-cme rs-serve basis n he vera avaiabe

amn was sed p. the vera avaiabe amn f he

prgramme is HuF 500 biin in he rs rnd, which may

be raised p HuF 2,000 biin by he Mneary Cnci,

depending n he prevaiing macrecnmic, nancia and

ending envirnmen. of he ans, 90 per cen may be

disbrsed in he frm f new ans, whie a maximm f 10

per cen may be sed renance sanding HuF r freigncrrency ans. In view f he higher ra f new ans, he

benecia impac f he prgramme n ecnmic grwh is

expeced increase. In he secnd phase f he prgramme,

new cndins wi cme in eec, which are designed

redce he ninended ses f he ans which d n r ny

inscieny serve he bjecves f he Scheme.

A he end f 2013, based n he feedback frm represenaves

f he privae secr and credi insns, he MNB ne-

ned he cndins f he prgramme nce again. Amngs

her changes, frm 1 Janary 2014 nancia enerprisesmay as prvide nancing and, in addin ans, a new

prdc nancia ease can be as ered nder he FGS.

Wih he annncemen f he FGS, he w-year caeraised

an ender was sspended eecve as f 4 Apri 2013.

Forint liquidity management of the banking system

In 2013, he frin iqidiy f he banking secr was

inenced by a nmber f facrs. on he ne hand, iqidiy

was bsed by he FGS and genera gvernmen paymens;

n he her hand, iqidiy was absrbed by he increase in

cash in circan and he cenra banks sanding swap

cnracs. By December 2013, a frin iqidiy (cenra

bank bis, he baance f seemen accns and he

Chart 3

Course and ulisaon of the 1st phase of the FGS

120

100

80

60

40

20

0

Source: MNB.

Repred amn per weekusage in Piar I (righ-hand scae)usage in Piar II (righ-hand scae)

120

100

80

60

40

20

0

3June7

June

10June14June

17June21June

24June28June

1July5July

8July12July

15July19July

22July26July

29July2Aug.

5Aug.9Aug.

12Aug.16Aug.

21Aug.24Aug.

26Aug.30Aug.

2Sept.6Sept.

9Sept.13Sept.

16Sept.20Sept.

23Sept.27Sept.

HuF biin Per cen


MAGYAR NEMZEtI BANK


25/102

vernigh cenra bank depsi pri geher) had risen

by HuF 1,300 biin HuF 6,000 biin.

Credi insns reqired hd reserves may chse frm

reserve ras f 2, 3, 4 and 5 per cen semi-annay (in Apri

and ocber). In 2013, he average reqired reserve radecined sighy, sanding a 2.59 per cen in Nvember 2013.

Sarng frm he secnd haf f 2012, he cas iqidiy

managemen ypica f he banking secr previsy

appeared ease smewha. Neverheess, he iqidiy

managemen f he banking secr became mre cas

nce again sarng frm Ags 2013. Cmpared previs

mnhs, credi insns hding f excess reserves a he

beginning f he mnh increased, and in addin, heir

pri f new vernigh depsis wih he cenra bank

as rse. Beween Janary and Jy 2013, credi insnspaced vernigh depsis wih he cenra bank in an amn

f HuF 95 biin n average, cmpared an average f HuF

140 biin beween Ags and December f 2013. owing

he rising cenra bank vernigh depsi pri, he

vernigh inerbank nsecred ineres rae, i.e. he HuFoNIA,

decined sighy wihin he ineres rae crridr. Whereas

he HuFoNIA was 30 basis pins wer han he cenra bank

base rae n average beween Janary and Jy 2013, in he

perid frm Ags December 2013 he dierence rse

55 basis pins n average. As he HuFoNIA apprached he

bm f he ineres rae crridr, is vaiy as decined.

three-mnh inerbank yieds he yieds ms reevan fr

ineres rae ransmissin mved in ine wih he redcns

f he cenra bank base rae, and as reeced infrman

peraining expeced fre cs. likewise, ans prvided

hsehds wih shr-erm maries and wih a variabe

ineres rae r an ineres rae xan f p 1 year decined

a simiar degree as he cenra bank base rae, and he

same decine characerised he shr-erm depsis paced by

hsehds, as we as crprae an and depsi raes.

Aer he inegran f cperave banks, he accns fcperave banks previsy hed by he MNB are hed, as

frm 1 Nvember 2013, by he takarkbank. As a res, he

cperave banks cncerned are nw excded frm he

cnerpares f radina cenra bank perans.

Instruments providing foreign exchange liquidity

central bank currency swap transacons

Crrency swap spreads, which capre he exra css f

gaining access freign crrency nancing, decined in

2013. Whie vernigh and hree-mnh FX spreads sd

a 55 and 125 basis pins, respecvey, in 2012, hey fe

20 and 40 basis pins, respecvey, in 2013. this decine

k pace in Q1, parae an increase in he freign

crrency sppy f freign invesrs in he crrency swap

marke. Anher psive devepmen was he fac ha

he emprary spread increases bserved in previs years

a he end f each qarer were ess characerisc f hemarke in 2013. A he same me, hwever, he widening f

he spreads was s ypica a he end f he year.

uisan f he MNBs radina (vernigh and hree-

mnh) EuR/HuF crrency swaps prviding EuR iqidiy

decined cmpared previs years. the banking secr

ny k recrse he vernigh insrmen, n a a

f hree ccasins (cmpared 9 ccasins in 2012).

In December, in rean end-f-year psin csing

acvies, he MNB annnced a ne- EuR/HuF swap

ender prviding w-week EuR iqidiy; hwever, herewas n demand fr his insrmen as ensins in he marke

had abaed cmpared previs years.

under Piar III f he FGS, he MNB annnces crrency

swaps prviding freign crrency iqidiy is credi

insn parners. Piar III is inended migae he

vnerabiiy f he cnry and he ineres rae risks f he

MNB. Since 3 Jne 2013, EuR/HuF FX swaps and CIRS (m-

crrency ineres rae swap) enders have been annnced

n a weeky basis wih eigh dieren maries. the frins

Chart 4

Recourse to the MNBs FX swap instruments

outstanding amounts

Source: MNB.

13oct.08

12Dec.08

10Feb.09

11Apr.09

10June09

09Aug.09

08.oct.09

07Dec.09

05Feb.10

06Apr.10

05June10

04Aug.10

03oct.10

02Dec.10

31Jan.11

01Apr.11

31May.11

30July.11

28Sep.11

27Nv.11

26Jan.12

26Mar.12

25May.12

24July.12

22Sep.12

21Nv.12

20jan.13

21Mar.13

20May.13

19July13

17Sep.13

16Nv.13

1-day er iqidiy prviding EuR/HuF swap6-mnh er iqidiy prviding EuR/HuF swap3-mnh er iqidiy prviding EuR/HuF swap1- r 2-week er iqidiy prviding EuR/HuF swap

2,200

2,000

1,800

1,600

1,400

1,200

1,000

800600

400

200

0

Miin ers Miin ers 2,200

2,000

1,800

1,600

1,400

1,200

1,000

800600

400

200

0




26/102

prvided by he cnerpares he MNB n he sp eg

f crrency swaps redce he cnerpares frin iqidiy,

hereby decreasing heir sck f cenra bank bis. Since

he EuR iqidiy prvided by he MNB cnerpares

depees is freign crrency reserves, in rder redce

vnerabiiy, credi insns parcipang in he endersare expeced redce heir shr-erm exerna iabiies

in ine wih he freign crrency bained. the prgramme,

which was annnced as asng n end-Ags 2013 nder

he rigina cndins, was exended by he MNB frm he

beginning f Sepember n cancean. the MNB as

deermined ha he maximm vae f FX swaps ha can

be acaed wihin he prgramme was EuR 2.5 biin. on

31 December 2013, a sanding FGS swap cnracs

amned EuR 568 miin. the rigina mariy fr a par

f he sanding pri was 3 mnhs, and 30 mnhs fr

he res f he pri.

3.2 STABILITY OF THE FINANCIALINTERMEDIARY SYSTEM

Prsan he MNB Ac, wih prejdice is primary

bjecve (price sabiiy), he MNB spprs he mainenance

f he sabiiy f he nancia inermediary sysem, he

enhancemen f he sysems resiience shcks, ssainabe

ecnmic grwh and he ecnmic picy f he Gvernmen.

In addin, i deveps he macrprdena picy peraining

he sabiiy f he sysem f nancia inermedian as awhe and, frm 1 ocber 2013, exercises spervisin ver

he nancia inermediary sysem and perfrms cnsmer

precn fncns.

In rder ensre he sabiiy f he nancia inermediary

sysem, he MNB expres and presens he risks jepardising

sabiiy, and parcipaes in he prevenn f sysemic risks and

in he redcn and eiminan f exisng risks. the Magyar

Nemze Bank pbishes is anayses n he risks jepardising

he smh fncning f he nancia inermediary sysem in

its Report on Financial Stability.

In ine wih he pracce f recen years, in 2013 he MNB

pbished is Report on Financial Stabilitywice (21 May and

7 Nvember), and issed is qarery pbican ened

Trends in Lending wih he ress f is srveys presenng

he aes rends in ending. Wih respec iqidiy and

capia adeqacy, he resiience f he Hngarian nancia

inermediary sysem was adeqae in 2013, whie ending

acviy imprved. the aer can be mainy aribed he

cenra banks easing cyce and he FGS.

the new MNB Ac cming in frce n 1 ocber 2013

reinfrced he cenra banks macrprdena mandae,

and prvided i wih he apprpriae se f insrmens as

we. As a res f he spervisry inegran, addina

cmpeences were cnferred pn he MNB. In accrdance

wih is reinfrced and expanded pwers, he MNB cperaes

wih he ahries f he Erpean unin devep is se

f insrmens and picy designed ensre he sabiiy fhe dmesc sysem f nancia inermedian.

Role of the Financial Stability Council

the exended fncns and cmpeences f he rganisan was

sppemened by a new decisin-making srcre. the spreme

decisin-making bdy f he MNB remains he Mneary Cnci.

Decisin-making in respec f micrprdena, macrprdena,

cnsmer precn and he sbseqeny deveped resn

fncns is perfrmed by he newy esabished Financia

Sabiiy Cnci. the Financia Sabiiy Cnci is cmpsed fhe Gvernr f he MNB, as chairman f he Financia Sabiiy

Cnci, a hree Depy Gvernrs, and he Execve Direcrs

respnsibe fr nancia sabiiy, ending incenves and he

spervisin f nancia insns. the Financia Sabiiy Cnci

makes decisins wihin he sraegic framewrk dened by he

Mneary Cnci.

the aignmen f mneary picy and macrprdena picy

decisins is ensred by he verap beween he persnne f he

w cncis n he ne hand, and by he pririy f mneary

picy aspecs dring he preparans fr macrprdena

picy decisins n he her hand. Mrever, he baanced


MAGYAR NEMZEtI BANK

cmpsin f he Financia Sabiiy Cnci faciiaes he

reaisan, a he highes pssibe eve, f he rganisana

inegrans pririy arges, he aignmen f macrprdena

and micrprdena picies and cse, smh cperan in

crisis managemen.

Chart 5

Heat map of nancial stability risks

Prcycicaiy Shck-absrbing capaciy

May 2013

Nvember 2013

Nvember 2013

May 2013


27/102

3 the grwh spprng fncn (prcycicaiy) f he nancia sysem is apprximaed by he eve f he Financia Cndin Index (FCI) and heEary Warning Indicar (EWI), whie resiience shcks is apprximaed by he wes vae f hree para indicars (Sysem-Wide Financia SressIndex [SWFSI], liqidiy Sress Index [lSI], and Svency Sress Index [CSI].

secr. under Piar I, he cnracs f credi insns

amned HuF 472 biin, whie HuF 229 biin was

disbrsed in Piar II. New ans accn fr mre han 60 per

cen f he ans disbrsed in Piar I, which is benecia in

respec f he prgrammes impac n grwh. likewise, he

ans disbrsed by credi insns in Piar II were primariysed renance invesmen ans. the renancing f

freign crrency ans redced he SME secrs expsre

exchange rae risks and hs migaed he assciaed sabiiy

risks. Wihin he minimm HuF 3 miin and maximm HuF

3 biin cnrac amn imi, brrwers preferred smaer

vae ans: in erms f he nmber f cnracs, 70 per cen

f he an amns were bew HuF 50 miin.

thanks he FGS, he ineres brden n crprans

eased sbsanay, imprving he nancia psin and

crediwrhiness f he rms cncerned. In addin, in hecase f renancing, he FGS pened p an pprniy fr

swiching banks, which bsed cmpen beween credi

insns. In he case f renanced ans, 20 per cen

f csmers p swich banks. Increased cmpen

cnribes he easing f ending cndins and faciiaes

mre ecien acan f fnds.

Access nger-erm ans deeriraed, especiay dring

he years f he crisis. t a arge degree, he FGS addressed

Chart 6

Financial Condion Index (FCI), real GDP

and the output gap

Note: If the sign of the FCI is idencal to that of the output gap, thebanking sector behaves procyclically. The FCI refers to contribuon

to economic growth; if it is negave, it decreases, if it is posive, itincreases GDP.

6

4

2

0

-2

-4

-6

-8

-10

6

4

2

0

-2

-4

-6

-8

-10

06Q1

06Q2

06Q3

06Q4

07Q1

07Q2

07Q3

07Q4

08Q1

08Q2

08Q3

08Q4

09Q1

09Q2

09Q3

09Q4

10Q1

10Q2

10Q3

10Q4

11Q1

11Q2

11Q3

11Q4

12Q1

12Q2

12Q3

12Q4

13Q1

13Q2

13Q3

op gapRea GDPFCI

Per cen Per cen

Key developments in the nancialintermediary system

the nancia inermediary sysem f a cnry fs is

fncns he bes if i is capabe f resisng shcks andspprng ecnmic grwh wih he ecien acan f

resrces. the shck-absrbing capaciy f he Hngarian

banking secr is adeqae bh frm a iqidiy and a capia

adeqacy perspecve. the marked prcycicaiy f he nancia

sysem cnned decine in 2013, b he ending acviy f

dmesc nancia insns s des n adeqaey sppr

ecnmic grwh. Hwever, prcycicaiy, which has been

idened by he MNB as a majr risk, has decined, primariy

de he MNBs rae-cng cyce and he FGS.

In is Reprs n Sabiiy pbished in 2013, he MNB evaaedhe sabiiy f he Hngarian nancia inermediary sysem

sing ve key nancia sabiiy indicars3. As hese indicars

express a specic sae, as regards fre risks hreaening he

sabiiy f he nancia sysem, hey are nabe capre

a risks.

the vae f he FCI which shws he exen which he

nancia inermediary secr (banking sysem) cnribes

he anna grwh rae f rea GDP sggess ha he

peran f he banking sysem remained prcycica. once

again, he FCI exhibied a highy negave vae in 2013, whie

he p gap was as negave. therefre, he nanciasysem remained cnracnary and faied spr ecnmic

grwh de is weak credi sppy.

the bjecve f he pbican Trends in Lending anched

in 2013 is presen a cmprehensive anaysis f he aes

rends in ending and hep inerpre hese devepmens

apprpriaey. t his end, i eabraes n he devepmens

in credi aggregaes and ineres raes, and he ress f he

ending srvey, namey he demand fr ans perceived by

banks and credi cndins.

Ahgh he cnracn f ans he crprae secr did

n sp in 2013, he decine was ess prnnced, in which

he FGS payed a eading re. the high isan f he rs

phase f he FGS (see Chaper 3.1) and feedback frm credi

insns and represenaves f he privae secr sgges

ha he FGS mbiised credi marke parcipans bh n

he demand and n he sppy side: severa crprans

recnsidered he nancing f heir bsiness acviy and

appied fr ans, which rned banks aenn he SME




28/102

his deciency f he credi marke as we. Wih he maximm

en-year mariy spaed by he MNB, credi insns

were wiing prvide ng-erm ans wih an average

mariy f neary 7 years wih a xed, maximm ineres rae

f 2.5 per cen per annm n he end f he erm. the FGS

has reached every secr, wih he majriy f ans exendedin he secrs f agricre, rade and manfacring.

the FGS as redced he eve f cncenran acrss

he regins: reave a SME ans sanding, credi

insns disbrsed mre ans cmpanies in he

Shern and Nrhern Grea Pain regins, whie he share f

Cenra Hngary was signicany wer han i is in he vera

pri.

In view f he sccess f he FGS, he Mneary Cnci

decided cnne he Scheme. In he cnex f he

exended prgramme (n he end f 2014), he MNBcnnes prvide renancing ans wih a 0 per cen

ineres rae, which banks are awed add a maximm

premim f 2.5 percenage pins when hey exend ans

sing his faciiy. thanks he FGS, he cnracn f he

crprae an pri is expeced cme a ha in 2014

and 2015, and here may be a rnarnd in ending SMEs.

this nwihsanding, a ssained recvery in ending wi

reqire frher easing f credi cndins n he sppy side,

as even hgh cndins appeared ease smewha in

2013, hey s remained gh.

As regards he hsehd segmen, he FX an priaccmaed befre he crisis cnned cnrac, whie

new disbrsemens hi a hisrica w in 2013 befre an

imprvemen began, hanks ans prvided wih an

ineres rae sbsidy.

the high share f nn-perfrming ans represens a marked

risk he nancia inermediary sysem. As regards he

crprae pri, he nn-perfrming an ra remained

praccay nchanged a exremey high eves in 2013, b he

imprvemen in he ecnmic grwh k has a psive

impac n he incme psin f he crprae secr.Ahgh banks pri ceaning acceeraed smewha

cmpared recen years, i is s cnsidered sw. Amid he

cnned cnracn f he crprae pri, he MNB

expecs he ra f nn-perfrming ans remain high, a a

eve f arnd 1820 per cen, in he nex w years.

In he hsehd an segmen, he nn-perfrming an

ra reached 18 per cen in 2013, b he MNB expecs he

ra decine in his secr ver he nex w years. the

indebedness f hsehds in freign crrency cnnes

pse a signican nancia sabiiy risk. Swiss franc-

denminaed ans pay a key re in he deeriran f he

pri. Indebed hsehds face increasing deb brdens

and higher insamens wing he apprecian f he Swiss

franc and rising bank ending raes, eading a decine in heir

cnsmpn and, in he wrs case, insvency. Meanwhie,

he increase in an-ss prvisins cver he rising sck

f nn-perfrming ans pses a seris chaenge banks.

Gvernmen prgrammes cnribe redcing he ra

f nn-perfrming ans, b he main prgramme, he

exchange rae cap, is nabe fy address freign crrency

indebedness in is crren frm. Even fwing he signican

exensin f he deadine fr enry, he isan rae f he

exchange rae cap scheme des n sbsanay exceed 50 per

cen. the qesnnaire-based MNBGfK srvey cndced

in 2013 reveaed ha haf f hse n parcipang in he

exchange rae cap scheme expained heir p- eiher wih

heir ack f cndence in banks r he increase in he brden

fwing he expiry f he grace perid. one qarer f hsen parcipang are hping fr a gvernmen measre mre

favrabe han he exchange rae cap.

the prabiiy f he Hngarian banking secr remained

w dring 2013. Fwing years f heavy sses, he banking

secrs pre-ax prs amned js HuF 143 biin a he

end f December 2013. Anher aspec f banks prabiiy

was he arge degree f asymmery in he perfrmance f

individa parcipans. the w prabiiy f he Hngarian

banking secr and is sbded prabiiy k cnne

be a cmpeve disadvanage in he acan f paren

bank fnds incding capia he regin.

Abei wih swing dynamics, he w f freign fnds

(primariy paren bank fnds) frm Hngary cnned in 2013.

the wihdrawa f freign fnds was accmpanied by a sigh

increase in swaps sanding and he banking secrs parae

baance shee adjsmen. the fac ha he an--depsi

ra drpped bew 110 per cen as pins redced

reiance n exerna nancing, ahgh his decine came

a ha in he secnd haf f he year, mainy becase f he

w f hsehd depsis. I is ny de he sbsana

amn f iqidiy in he banking secr and he cnnedbaance shee adjsmen f hsehds ha his arge w

f fnds did n case any maeria ensin in banks baance

shees.

In 2013, bh he liqidiy Sress Index (lSI) and he Svency

Sress Index (SSI) shwed w vaes. the liqidiy Sress

Index is 10.7 per cen, which means ha if he sress scenari

maeriaised, ny a few f he parcipans in he banking secr

wd fa bew he regary minimm. I is as favrabe

ha a he individa eve, a banks wd remain iqid even

in a pena sress scenari. Banks shr-erm iqidiy is

mre han wice he regary reqiremen, meaning ha

heir ps-sress iqidiy srps wd exceed he regary


MAGYAR NEMZEtI BANK


29/102

minimm, b his srps is mainy avaiabe in frin. As a

res, smh fncning f he swap marke is indispensabe

in a prraced sress scenari.

the capia adeqacy ra f he banking secr increased

dring he year, appraching 17 per cen. the signican sses

incrred in 2012 were argey se by he capia increasesf paren banks, ahgh severa insns sered sses

in 2013 H1 again. therefre, in he 2013 sress es he

banking secrs inia capia psin and shck-absrbing

capaciy did n imprve cmpared he end f 2012. this

is as cnrmed by he Svency Sress Index, he eve f

which remained ams nchanged cmpared he end f

2012. Ahgh average capia adeqacy is sasfacry, he

aggregae indicar cnceas signican asymmery. Whie

expeced sses decined smewha in he sress scenari

cmpared r previs sress es, he earnings capaciy

f banks as deeriraed. Accrdingy, w majr banks mayhave addina need fr capia ver a w-year hrizn. Even

hgh he banking secrs a capia need f HuF 116

biin is cnsidered signican, his risk is manageabe wih

paren banks cnned cmmimen.

Macroprudenal regulatory and resoluonacvity of the MNB

As regards nancia regan, he ms signican even f he

year was he impemenan f he spervisry inegran,

in parae wih which he new MNB Ac enering in frce n

1 ocber 2013 reinfrced he macrprdena mandae f

he MNB, prviding i wih he apprpriae se f insrmens.

In ine wih is reinfrced mandae, he MNB esabishes he

macr-prdena picy fr he sabiiy f he enre sysem

f nancia inermedian, wih he bjecve f enhancing

he resiience f he sysem f nancia inermedian and

ensring is ssainabe cnribn ecnmic grwh. tha end and wihin he imis specied in he MNB Ac, he

MNB expres he bsiness and ecnmic risks hreaening

he sysem f nancia inermedian as a whe, prmes

he prevenn f he devepmen f sysemic risks and

he redcn r eiminan f sysemic risks which have

evved. Frhermre, in he even f disrbances he

credi marke i cnribes he baanced fncning

f he sysem f inermedian in nancing he ecnmy

by smang ending r in he even f excessive credi

w by resraining ending.

the sa f he MNB acvey sppred he spervisry

inegran by preparing prfessina maerias and by

ering pinins in respec f he new MNB Ac. Befre he

cmmencemen f he egisave wrk perfrmed nder he

direcn f he Minisry fr Nana Ecnmy, he expers

f he MNB drew p prfessina discssin maerias. on

he ne hand, his incded he prpsa fr srenghening

he macrprdena fncn f he cenra bank and he

insrmens be depyed fr his prpse, and n he

her hand, i emphasised he imprance f reinfrcing

he individa spervisin f nancia insns, which

cd be achieved by inegrang he Hngarian FinanciaSpervisry Ahriy (HFSA) he ahriy respnsibe fr

micrprdena des in he cenra bank.

Hsed by he MNB, he V6 Financia Sabiiy Meeng was

hed n 2 Sepember 2013 wih he parcipan f he

eaders f he cenra banks and spervisry ahries f

Cenra and Easern Erpean cnries. the crren isses

discssed a he meeng incded, amng her pics, he

se f macrprdena picy and insrmens in a cenra

bank inegraed wih a spervisry ahriy; he eecs and

chaenges f he banking nin and cse cperan innn-er area cnries; isses cncerning he nancing f

sma and medim-sized enerprises wih a specia fcs n

he prspecs and imians f cnercycica picy, in he

cnex f which he presenan f he FGS and is ress

were given specia emphasis.

In he amn, he expers f he MNB payed a prminen

re in prviding pinins n he new Ac CCXXXVII f 2013 n

Credi Insns and Financia Enerprises and he reaed

amendmens exisng acs n nancia maers enering

in frce as f 2014. the new regan was necessiaed

by he impemenan f he Erpean unin direcve (CRD

IV) n he prdena reqiremens fr credi insns and

Chart 7

Liquidity Stress Index and Solvency Stress Index

60

50

40

30

20

10

0

Svency Sress Indexliqidiy Sress Index

60

50

40

30

20

10

0

09Q1

09Q2

09Q3

09Q4

10Q1

10Q2

10Q3

10Q4

11Q1

11Q2

11Q3

11Q4

12Q1

12Q2

12Q3

12Q4

13Q1

13Q2

13Q3

Note: The Liquidity Stress Index is the sum of normalised liquidity

decits relave to the 10 per cent level, weighted by the balance sheettotal. The higher the indicator, the greater the liquidity risk in the stress

scenario. The Solvency Stress Index is the sum of normalised capitalshortages relave to the 8 per cent level, weighted by the capitalrequirement. The higher the value of the index, the higher the solvencyrisk in the stress scenario.

Per cen Per cen




30/102

invesmen rms, as a res f which he macrprdena

pwers f he MNB were frher reinfrced as frm 2014, as

he macrprdena insrmens f he MNB were caried

reave he Ac in frce since ocber, and he cenra bank

received new insrmens sarng frm 2014.

In addin he impemenan f he spervisry

inegran and he reinfrcemen f he MNBs

macrprdena fncn, as f 1 ocber 2013 he MNB Ac

designaed he MNB as a fre resn ahriy. Based

n he reevan Erpean unin direcve, he resn

framewrk wi be dened by separae egisan, which

is expeced be adped by Pariamen in he rs haf f

2014. Fwing he enacmen f his egisan, he new

resn fncn wi hep ensre ha he individa

crisis f a credi insn r an invesmen cmpany des

n evve in a sysemic prbem r impair he fncnscnsidered crica frm he perspecve f he nancia

sysem. Resn may be viewed as an rdery aernave

f he iqidan prcedre in cases when iqidan wd

n be a reasnabe aernave de he cnsiderans

ined abve, ye i wi n be he sae (axpayers) ha

are expeced bear he brn f he irrespnsibe nancia

managemen f he insn cncerned becase f he

derimena sysemic eecs. Resn css are primariy

brne by he wners and credirs f he insn and he

parcipans f he secr.

In 2013 Q4, in rean is new resn des, he MNBcmmenced preparans fr is re as a resn ahriy.

As par f his wrk, he Financia Sabiiy Cnci adped

a resn cncep which denes, amng her hings, he

framewrk fr he appican f resn s and he

nancing backgrnd f resn. thereaer, he Cnci

aid dwn an impemenan radmap in ine wih he

cncep, deaiing frher fre asks fr he MNB in rean

resn. the MNB shared he prpsed regans

apprved by he Financia Sabiiy Cnci wih he Minisry

fr Nana Ecnmy, i.e. he minisry respnsibe fr making

preparans fr he fre Hngarian ac n resn.

In 2013, he expers f he MNB mnired he inernana

regary prcesses reevan he nancia sysem and

acvey parcipaed in cmmenng n dra regans be-

ing prepared in he Erpean unin. the MNBs sa ered

pinins n he direcve and dra regan n he prdena

reqiremens fr credi insns and invesmen rms

(CRD IV/CRR) impemenng he prpsed Base III regary

framewrk wihin he Eu, which was evenay adped in

Jne 2013. the rs piar f he banking nin, i.e. discssins

n he Singe Spervisry Mechanism (SSM), reached is na

phase as we, and he reaed regans were adped by

he Erpean Pariamen n 12 Sepember 2013.

In he cnex f preparans fr is resn asks, he

MNB mnired amendmens he egisan harmnising

nana resn ahries and insrmens a he

Eu eve (Bank Recvery and Resn Direcve, BRRD)

and parcipaed in he prcess f cmmenng n he

reaed dras, as crdinaed by he Minisry fr NanaEcnmy. In December 2013, he Erpean Pariamen and

he Ecn Cnci reached an agreemen n he BRRD.

Anher newrhy even in he Erpean unin invved

devepmens in he Singe Resn Mechanism (SRM)

eg f he banking nin, in respec f which Member Saes

as reached a cnsenss a he end f he year. Bh f

hese devepmens may have an impac n fre resn

regans in Hngary. on he ne hand, frm 2015 a

Member Saes wi be reqired cmpy wih he naised

BRRD (he versin apprved by he Erpean Pariamen),

which herefre prvides a cear basis fr drawing p heHngarian resn framewrk and egisan. on he

her hand, he SRM inences he decisin n Hngarys

accessin he banking nin; herefre, pn deveping

and sbseqeny represenng he discssin cncep i is

impran ensre ha he deveping sysem is as in ine

wih Hngarian cnsiderans.

As sa, he MNB represened isef in inernana

rganisans and insns and, as an ahriy wih a

macrprdena mandae, i sppred he wrk f he

Erpean Sysemic Risk Bard (ESRB) and he Erpean

Banking Ahriy (EBA) by acvey parcipang in hecmmiees and wrking grps f hese Eu rganisans.

3.3 FINANCIAL SUPERVISION ANDCONSUMER PROTECTION

Integraon of the Magyar Nemze Bankand the Hungarian Financial SupervisoryAuthority (HFSA)

In is sessin n 16 Sepember 2013, he Pariamen adped

he dra egisan n he Magyar Nemze Bank (MNB),

which decided n he inegran f he fncn f nancia

spervisin in he cenra bank. the bjecve f he dra

egisan was ensre ha, as in severa her cnries,

cenra bank and spervisry acvies are perfrmed by

a singe rganisan; i.e. he Hngarian nancia secr is

spervised by he harmnised appican f inercnneced

micr- and macrprdena insrmens. In ine wih he

adped egisan, he handver-accepance prcedre

beween he Hngarian Financia Spervisry Ahriy

(HFSA) and he MNB k pace n 1 ocber 2013. As f 1

ocber 2013, he frmer righs and bigans f he HFSA


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as dened in Arce 176 f he MNB Ac were cnferred pn

he MNB.

the handver-accepance prcedre was ecien and did n

case any disrbance in day--day wrk. As a res f he

merger, he cassica cenra bank mandae and fncns wereenhanced by he expanded dimensins f respnsibiiy and

insrmens. the inegraed MNB exercises macrprdena

spervisin, which is inended ensre he sabiiy f he

enre nancia sysem and a heahy cnribn ecnmic

grwh; whie n he her hand, i exercises micrprdena

spervisin ver he insns cnsng he sysem,

hereby faciiang he enfrcemen f cmprehensive

sysem bjecves a he individa eve. the MNB as carries

marke srveiance and nancia cnsmer precn

des. these asks are n independen f ne anher: hey

ensre he sabiiy f he nancia sysem and he ecienperan f he nancia inermediary sysem geher, in

cse ineracn

Structure of the MNBs professional areas delegated to

the Deputy Governor responsible for the supervision of

nancial instuons and consumer protecon

As f 1 ocber 2013, he rganisana nis nder he

Depy Gvernr respnsibe fr he spervisin f nancia

insns and cnsmer precn assmed ms f he

previs asks f he HFSA. the direcraes esabished

wihin he new rganisana srcre are respnsibefr he spervisry acvies reaed specic nancia

areas. the Execve Direcr f Financia Insns

Spervisin spervises he Direcrae fr Credi Insn

Spervisin, he Direcrae fr Insrance, Pensin Fnds,

Financia Enerprises and Inermediaries Spervisin and

he Direcrae fr licensing and lega Enfrcemen. the

Execve Direcr respnsibe fr cnsmer precn and

marke spervisin versees he acvies f he Direcrae

fr Cnsmer Precn and he Direcrae fr Marke

Spervisin. In 2013, he Direcrae fr Mehdgy and

he Financia Cnsmer Precn Cenre repred direcy he Depy Gvernr.

Development of the MNBs supervisory strategy

Fwing he inegran, here was a need devep a

sraegy bi n he new rganisana framewrk and

empying he MNBs expanded se f insrmens. In

deveping he spervisry sraegy fr he perid f 2014

2019, he sarng pin was he visin f an idea, smhy

fncning nancia secr and a srng spervisry ahriy

acknwedged and recgnised in he spervisry cmmniy

f he Erpean unin, capabe f cnsiseny and ecieny

shaping he nancia sysem. Dring his wrk, he missin

f he spervisry area was dened. the missin f he

MNB is mainain and sppr he sabiiy f he nancia

sysem and srenghen he cndence f parcipans bh

in he sysem and in ne anher wih he assisance f he

inegraed spervisry insrmens. the eadership f he

MNB designaed cndence and sabiiy as pririy vaesfr he spervisry area. the renewed sraegy ses a nmber

f ceary dened bjecves fr he nex ve years which he

MNB wishes achieve in he spervised markes and wih

respec f isef as an insn, by aking advanage f he

pprnies prvided by he insrmens a is dispsa.

the asks reqired fr he achievemen f he ng-erm

bjecves have been designaed fr each spervised secr

and spervisry area.

Micro-prudenal supervision

Supervision of credit instuons

Micr-prdena spervisin is inended faciiae he

prden peran f credi insns, spervise he

caref exercise f wners righs, idenfy and assess he

risks assciaed wih individa insns, migae r

eiminae risks, and ake prevenve measres in rder

ensre prden perans. Appying he framewrk

renewed and deermined by he mehdgy, he MNB

cndced a scheded inspecns. Bh in n-sie and -

sie micrprdena spervisin, pririy inspecn areas

incded he managemen and migan f high accmaedcredi risk a credi insns and he examinan f he

inspeced insns capia psin, prabiiy and he

ssainabiiy f is bsiness mde. In addin, specia fcs

was given he evaan f iqidiy and, in case f arge

banking grps, recvery pans were reqesed and examined.

In he cperave bank secr, he inegran f cperave

credi insns caed fr nn-sandard icensing and

spervisry asks, which were addressed by he MNB wih

inensive prfessina aenn. As he new Eu reqiremens

(CRD IV/CRR) fr credi insns and invesmen rms

enered in frce n 1 Janary 2014, preparans fr hesenew regans as payed an impran re, in addin

he spervisry wrk.

the spervisry ceges f nancia cngmeraes perang

in severa cnries are cperan frms fr nana

spervisry ahries, and cnse a par f he Erpean

spervisry srcre. In Cenra and Easern Erpe, ny he

MNB exercises eadership ver a banking spervisin c-

ege and i des s in rean he otP Grp. the MNB

parcipaes in he res f he Eu spervisry ceges as a hs

ahriy spervising he sbsidiary r he branch ce. In

perid nder review, he inernana asks reaed he c-

eges and he Erpean Banking Ahriy were cmpeed




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as scheded. on 23 ocber 2013, he Erpean Cenra Bank

pbished a cmmnican n a cmprehensive asse qaiy

review (AQR) be cndced in 2014 fr he 130 arges banksf he er area. Preparans fr acve parcipan in he

inernana review cmmenced as eary as 2013.

the phase scheded fr Q4 in he 2013 Inspecn Pan was

cmpeed; n 1 ocber 2013 a a f 32 inspecns were

in prgress, f which 13 inspecns were cmpeed by 31

December 2013.

Supervision of insurance companies, funds, nancial

instuons and intermediaries

Cnns risk-based spervisin and cperan wihhe aeced secrs and spervised insns prceeded

smhy in he perid nder review. Wih he impemenan

f he spervisin pan deveped ensre he simanes

enfrcemen f prdena and cnsmer precn aspecs,

he MNB sccessfy ensred he smh prgress f marke

rends whie as aking in accn brad-based csmer

ineress, n ny a he eve f individa insns, b

as a he eve f he enre marke and marke segmens.

Fcsing n pririy inspecn arge areas, he

cmprehensive inspecns f insrance cmpanies andfnds were cmpeed in f. Deciencies viang he aw

r cnsmers ineress were deeced in severa cases dring

he review f mr hird-pary iabiiy insrance pans and

ni-inked ife insrance pans in respec f ega, acary and

cnsmer precn aspecs, and dring he examinan

f he sck managemen f picies. In addin, prdena

risks were idened and addressed ypicay in rean

bsiness regisry sysems, he adeqacy f daa sppy and

he frman f insrance echnica reserves. In he n-

sie inspecn f vnary ma insrance fnds, pririy

aspecs incded he prper execn f member accn

seemens and he crrec creding f membership fees

individa accns in accrdance wih he apprpriae

Table 2

Number of inspecons at credit instuons, insurance companies, funds and intermediaries

Type of instuon Type of inspeconIn progress on

1 Oct 2013Launched aer

1 Oct 2013

Insrance cmpanies Cmprehensive 7 7

Pensin fnds Cmprehensive 8 2

Heah fnds Cmprehensive 7 3

Ma aid fnds Cmprehensive 1 _

Inermediaries targe _ 2

Credi insns Cmprehensive 30 4

Credi insns targe 2 _

disribn ra. As regards vnary pensin fnds, pririy

was given he examinan f indirec invesmen css ver-

ss direc css. As par f he spervisin f inermediaries,he scheded argeed n-sie inspecn was cmpeed, and

addinay, argeed -sie inspecns were cndced a

severa independen inermediaries. In rder eiminae he

iega pracces fnd dring he inspecn, he MNB issed

a resn. the MNB parcipaes acvey in deveping he

regans fr he Erpean insrance spervisin; i has a

permanen membership in he Bard f Spervisrs f he

Erpean Insrance and occpana Pensins Ahriy

(EIoPA) and in he ms impran EIoPA wrking grps

respnsibe fr wrking qanave and qaiave

regary sandards. the expeced changes in he regary

framewrk wi impy new spervisry asks as we. on hene hand, he res f he Ac n Insrance Insns

and he Insrance Bsiness peraining he gvernance

sysem as amended in accrdance wih he preparans

fr Svency II wi be inrdced, and n he her hand,

in he cnex f he omnibs II Direcve apprved by he

Erpean Pariamen in he spring f 2014, he naisan

and adpn f wer-eve egisan can cmmence in he

crse f 2014 and 2015. the Svency II Direcve and he

reaed regans ms be impemened in nana aw by

31 March 2015.

on 1 ocber 2013, a a f 23 inspecns were in prgress in

he secr f insrance cmpanies, fnds and inermediaries,

and 14 inspecns were anched aer 1 ocber.

Supervision of capital market instuons

In 2013 Q4, he MNB did n idenfy any circmsances

enaiing sysemic risks r warranng immediae acn amng

he spervised capia marke insns; cnseqeny,

here was n need fr exrardinary argeed inspecns r

cmprehensive reviews. In respec f insns prviding

invesmen services, in he nging spervisin and

inspecns he spervisry area fcsed mainy n prvisins


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reaed he precn f cien caims and cmpiance wih

he reqiremens cncerning he prvisin f infrman

ciens. Based n he ndings f he inspecns, he service

prviders had adeqae cverage fr cien caims, and he

segregan dergans and insciencies in daa sppy

which were fnd ypicay did n viae cien ineress.Deciencies were deeced in severa cases in respec f he

prvisin f infrman ciens, cien accn managemen

and rder managemen. the review f srced acvies

idened severa inapprpriae prcedres parcary in he

case f rading parms.

An addina pririy f he capia marke area was

faciiae he preparans f he aeced marke parcipans

fr he appican f Regan (Eu) N 648/2012 n otC

derivaves, cenra cnerpares and rade repsiries

(EMIR), and address he spervisry ahriy asks

be perfrmed in rder ensre he cmpiance f KElERKSZF wih he prvisins f EMIR. the icensing prcedre

f KElER KSZF as a cenra cnerpary prsan EMIR

and he reaed cmprehensive review and vaidan

prcess sared in Sepember 2013 based n he previsy

deveped mehdgy and risk managemen qesnnaire.

the icensing prcedre (preparan f risk assessmen,

peran f spervisry cege) is expeced be cncded

in he rs haf f 2014. As he aeced marke parcipans

seek gidance frm he MNB dring heir preparans, he

MNB prvides assisance hrgh infrman, presenans

and cnsans prvided hrgh varis channes, as weas dieren gideines pbished n he MNBs websie.

Based n he experiences f previs inspecns, as regards

fnd managers, pririy arge areas incded he inspecn

f dieren charges, he pri and fnd managemen

fees appied, as we as her expenses. As regards he

managed fnds, deciencies were idened in severa

cases in respec f cmpiance wih he res peraining

he regar and exrardinary prvisin f infrman

invesrs (faire pbish pri reprs; faire send

reprs he spervisry ahriy r deays in sending;

sbsanve deciencies in he reprs; faire pdae

key invesr infrman). In addin, n severa ccasins

Table 3

Number of inspecons at capital market instuons

Type of instuon Type of inspeconIn progress on

1 Oct 2013Launched aer

1 Oct 2013

Invesmen service prviders Cmprehensive 1

Invesmen fnd managers Cmprehensive 2 2

Venre capia fnds Cmprehensive 2

oher (KElER, KElER KSZF) Cmprehensive 2

he ne asse vae cacan was incrrec and herefre

he invesrs cmpensan was ae. In he case f rea

esae fnds, bservans were made ab he persn

f he prfessina appraising he rea esae r he ack f

regary pdaed appraisas. In severa cases, regans n

iqid asses and rea esae ypes were viaed. Sme assemanagers engaged in pri managemen were fnd

have viaed he res peraining he gahering f advance

infrman r he cmpsin f pris. Mrever,

pn examining ransacns beween he managed

pris, sme ransacns were fnd be derimena

ne f he pares r gave rise cncerns in respec f fair

marke pracces. Dring he review f venre capia fnd

managers, sme minr deciencies were idened in respec

f he eve f inerna regans and daa sppy.

of he inspecns cndced in 2013, 6 cmprehensive reviews

were anched a spervised capia marke insns in2013 Q4; a f hem are expeced be cncded in 2014

Q1. of he inspecns cmmenced befre 1 ocber 2013,

he cmprehensive review f 2 fnd managers cnned in

2014. In 2013 Q4, a review f an invesmen cmpany which

had cmmenced earier was cncded wih a decisin caing

fr measres, wih n penay impsed.

Market surveillance

the MNB akes acn agains nicensed r nregisered

bsiness acvies, insider rading r marke manipanwihin he framewrk f marke srveiance prcedres, and

as veries cmpiance wih he res peraining sck

exchange acqisins. Fr he mre ecien execn f

hese asks, he Financia Sabiiy Cnci apprved a new,

sandardised, predicabe and cnsisen marke srveiance

picy dening he appicabe measres and sancns,

which are garaneed have de resraining pwer ver a

parcipans f he mney and capia marke agains acvies

giving rise marke deviancies.

the MNB idened nregisered inermediary (agency)

services and nicensed invesmen services as key marke

risks. Cmpanies prviding he abve services were ypicay




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Table 4

Number of market surveillance invesgaons

13 Q4

Sbjec f invesgan: unicensed acvies Marke manipan

63

ta ne impsed (in HuFm) 584.2

engaged in nine frex rade and peraed an exended agency

newrk in rder reach a wide range f invesrs. In is marke

srveiance prcedres cndced in 2013, he MNB rigrsy

invesgaed he cmpanies engaged in he abve acvies, and

appied mre sringen sancns and penaes han sa in

rder crb his ndesirabe phenmenn. Rapid, immediae

spervisry acn was caed fr in severa cases whereprhibied marke manipan was sspeced. the sndness

f he spervisry decisins passed in he cases cncerned was

cnrmed by he fac ha marke parcipans acceped he

MNBs decisins cncding he invesgans wih exercising

heir righ f jdicia cnr, r, in he case f dispes, he cr

ring cnrmed he crrecness f he MNBs decisin.

the MNB k parcar care imprve he ransparency f

he acviy f sck exchange issers; ha end, i evaaed

and cndced argeed reviews f discsres n a cnns

basis. upn examining regar discsres, he MNB veried

he appican f inernana nancia reprng sandards(IFRS) amng ised issers in parcar. Aer assming

marke srveiance pwers, in he perid beween 1 ocber

2013 and 31 December 2013, he MNB cncded 8 marke

srveiance prcedres and 1 repeaed marke srveiance

prcedre, in which he marke srveiance ne amned

a a f HuF 584.2 miin.

the MNB pays an impran invesr precn re in he

icensing f capia marke issers by verifying cmpiance wih

sary regans fr a inia pbic erings. As par f

he icensing f issers, he MNB passed 227 resns and7 rings. owing egisave changes, arnd 75 per cen

f he prcedres were reaed he secr f invesmen

fnd managers, whie he remaining 25 per cen aeced

varis her areas f he capia marke (akevers, secriy

precn pans, apprva f IPo prspecs, ec.). As a

signican change, frm 1 Jy 2013 a cmmnicans in

respec f appicans and sbmissins dring he icensing

f capia marke prdcs are cndced eecrnicay.

Legal enforcement

In he cnex f is ega enfrcemen acviy, in 2013

Documents

Mnb School