Opinion of the European Central Bank of 8 November 2023 on the minimum reserve requirements of the Magyar Nemzeti Bank (CON/2023/36)

OPINION OF THE EUROPEAN CENTRAL BANK of 8 November 2023 on the minimum reserve requirements of the Magyar Nemzeti Bank (CON/2023/36) Introduction and legal basis

On 29 September 2023 the European Central Bank (ECB) received a request from the Magyar Nemzeti Bank (MNB) for an opinion on a draft MNB decree amending the MNB Decree on the calculation, method of allocation and placement of minimum reserves (hereinafter the ‘draft decree on required reserves’) and on a draft decree on the required reserve ratio (hereinafter the ‘draft decree on the required reserve ratio’) (hereinafter referred to collectively as the ‘draft decrees’). 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 decrees relate to the 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 decrees

1.1 The draft decrees aim, from 1 January 2024, to introduce a new method of calculating the MNB’s reserve requirements based on the monthly average of bank balance sheet data and to remove the option to choose among different required reserve ratios. 1.2 Currently, required reserves are calculated using the credit institution balance sheet date fixed as of 31 March 2023 on a spot basis and without recourse to averaging . The ECB adopted Opinion CON/2023/16 in relation to this calculation method. According to the explanatory memorandum accompanying the draft decrees, this provisional solution will come to an end as both the MNB and credit institutions will have implemented the technical developments necessary for the planned introduction of a permanent monthly averaging calculation method. 1.3 The MNB first enabled credit institutions to choose from different reserve ratios in 2010 , in relation to which the ECB adopted Opinion CON/2010/68. In 2022 the MNB reintroduced the option to choose among reserve ratios for certain liabilities , in relation to which the ECB adopted Opinion

CON/2022/33. Under those provisions, a reserve ratio of 0 % applied to: (1) deposits and loans taken, the maturity of which at the time of appearing in the accounting records of the credit institution subject to reserve requirements exceeds two years; (2) debt securities, provided that the maturity of the securities at the time of the issuance exceeds two years; and (3) repos. Additionally, a reserve ratio of 5 %, 6 %, 7 %, 8 %, 9 % or 10 % applied to all other liabilities included in a credit institution’s reserve base, depending on the declaration of the credit institution subject to reserve requirements. Under the current MNB decree on the required reserve ratio , the reserve ratio of 0 % is retained for the liabilities listed above, while the reserve ratio for all other liabilities included in a credit institution’s reserve base is 10 %, 11 %, 12 %, 13 %, 14 % or 15 %, depending on the declaration of credit institutions subject to reserve requirements. The draft decree on the required reserve ratio would remove the option to choose among different required reserve ratios and introduce a uniform 10 % reserve ratio for those liabilities, while retaining the 0 % reserve ratio for liabilities for which the same ratio currently applies.

2. General observations

2.1 As previously noted by the ECB , Member States whose currency is not the euro retain their powers in the field of monetary policy according to national law . On the introduction of the euro, Hungary’s monetary policy would be the single monetary policy for the euro and would need at that time to be consistent with the Eurosystem’s operational framework. Credit institutions should therefore be familiar with the requirements that will apply to them once the single monetary policy is implemented in Hungary. 2.2 The ECB notes that the draft decree on the required reserve ratio removes the option to choose among different reserve ratios, thus setting out reserve ratio requirements more in line with the minimum reserve requirements established by the ECB , which also do not include the option to choose among different reserve ratios. 2.3 In the euro area, minimum reserves are held and calculated on the basis of the sum of certain eligible liabilities . In particular, credit institutions are required to calculate these liabilities with respect to a particular maintenance period on the basis of the data relating to the month two months prior to the month within which the maintenance period starts , in relation to which a maintenance period begins on the settlement day of the main refinancing operation following the meeting of the Governing Council at which the assessment of the monetary policy stance is pre-scheduled . In order for a credit institution to comply with the reserve requirements, the average end-of-day balance on one or more of its reserve accounts over the maintenance period must be equal to or must exceed the

amount calculated for that period . The ECB notes that the draft decree on required reserves introduces a monthly averaging calculation method for the required reserves, thereby ending the provisional solution described in paragraph 1.2 above.

This opinion will be published on EUR-Lex.

Done at Frankfurt am Main, 8 November 2023.

[signed]

The President of the ECB

Christine LAGARDE