Opinion of the European Central Bank of 12 June 2023 on the minimum reserve requirements of the Magyar Nemzeti Bank (CON/2023/16)
OPINION OF THE EUROPEAN CENTRAL BANK of 12 June 2023 on the minimum reserve requirements of the Magyar Nemzeti Bank (CON/2023/16) Introduction and legal basis
On 25 May 2023, the European Central Bank (ECB) received a request from the Magyar Nemzeti Bank (MNB) for an opinion on a draft MNB decree (hereinafter the ‘draft decree’) amending the MNB Decree on the calculation, method of allocation and placement of minimum reserves. The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and Article 2(2) of Council Decision 98/415/EC , as the draft decree relates to instruments of monetary policy of a Member State that has not adopted the euro. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.
1. Background and purpose of the draft decree
1.1 In 2005 the Governor of the MNB adopted Decree 10/2005 on the calculation, method of allocation 2 3 and placement of minimum reserves , which was amended several times . The ECB adopted several opinions in relation to the proposed draft changes . 1.2 As noted in the explanatory memorandum accompanying the draft decree, the purpose of the current amendment is to ‘ensure that the level of the reserve requirement for maintenance periods better reflects the development of the reserve base of credit institutions’ and to ‘reduce the likelihood and magnitude of ad hoc turbulence in financial markets impairing monetary policy’. Prior to the present proposed amendment, the reserve base of credit institutions subject to reserve requirements was determined based on the monthly outstanding data for the last calendar day of the reference period preceding the relevant calendar month. The draft decree is introduced in the light of recent regulatory changes in Hungary. First, the reserve ratio was increased , in relation to which the ECB adopted Opinion CON/2023/6. Second, the negotiability of discount bills issued by the MNB was restricted
and an interest rate cap on certain demand deposits was extended , in relation to which the ECB adopted Opinion CON/2023/10. To react to these regulatory changes, and in order to prevent excessive adjustments of credit institutions’ balance sheets (i.e. around the last calendar day of the reference period preceding the relevant calendar month), the MNB is planning to introduce a monthly averaging calculation method based on daily balance sheet items subject to reserve requirements that will be applicable to every subjected credit institution. As a provisional solution until the infrastructural developments are completed for the new calculation method, the draft decree provides that the credit institution balance sheet date will be temporarily fixed as a calculation basis for required reserves as of 31 March 2023 on a spot basis and without recourse to averaging. 1.3 The draft decree also proposes to introduce an additional way to comply with reserve requirements in the form of term deposit instruments with an original maturity of at least 14 days and up to an amount equivalent to 15 % of the minimum reserve requirements.
2 Observations
2.1 The ECB notes that the draft decree does not determine when the monthly averaging method would be introduced to calculate the basis of required reserves, thus ceasing the application of a fixed credit institution balance sheet as of 31 March 2023 as a calculation basis. The ECB understands that the latter is a provisional solution, that the MNB is consulting with credit institutions on an ongoing basis on when the monthly averaging calculation method can be introduced, and that the MNB is committed to keeping the transition period as short as possible. 2.2 The ECB has noted in earlier opinions that Member States whose currency is not the euro retain their powers in the field of monetary policy according to national law . Once the euro is introduced, Hungary’s monetary policy will be the single monetary policy and will need to be consistent with the Eurosystem’s operational framework. Credit institutions should therefore be familiar with the requirements that would apply to them once the single monetary policy is implemented in Hungary.
This opinion will be published on EUR-Lex.
Done at Frankfurt am Main, 12 June 2023. [signed]
The President of the ECB
Christine LAGARDE
Fotnoter
- 1 Council Decision 98/415/EC of 29 June 1998 on the consultation of the European Central Bank by national authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42). 2 10/2005. (VI.11.) MNB rendelet a kötelező jegybanki tartalék kiszámításáról, illetve képzésének és elhelyezésének módjáról, published in Magyar Közlöny 2005/78. 3 The amendments on which the ECB adopted opinions were introduced by 43/2018. (XI.21.) MNB rendelet a kötelező jegybanki tartalék kiszámításáról, illetve képzésének és elhelyezésének módjáról szóló 10/2005. (VI. 11.) MNB rendelet módosításáról, published in Magyar Közlöny 2018/182, and 36/2022. (IX. 15.) MNB rendelet a kötelező jegybanki tartalék kiszámításáról, illetve képzésének és elhelyezésének módjáról szóló 10/2005. (VI. 11.) MNB rendelet módosításáról, published in Magyar Közlöny 2022/150. 4 Opinions CON/2005/14, CON/2018/48 and CON/2022/33. All ECB opinions are available on EUR-Lex. 5 6/2023. (III. 8.) MNB rendelet a kötelező tartalékráta mértékéről, published in Magyar Közlöny 2023/34.
- 6 A Kormány 89/2023. (III. 22.) Korm. rendelete gazdasági, finanszírozási tárgyú intézkedésekről, published in Magyar Közlöny 2023/41. 7 See, for example, paragraph 2 of CON/2023/6, paragraph 2.6 of Opinion CON/2022/38 and paragraph 2.1 of Opinion CON/2022/33. 8 Article 282(4) of the Treaty on the Functioning of the European Union and Article 42.2 of the Statute of the European System of Central Banks and of the European Central Bank.