Opinion of the European Central Bank of 27 May 2025 on the composition of the decision-making bodies of the Magyar Nemzeti Bank, the treasury accounts managed by the Magyar Nemzeti Bank and the permitted activities of foundations established by the Magyar Nemzeti Bank (CON/2025/12)

OPINION OF THE EUROPEAN CENTRAL BANK of 27 May 2025 on the composition of the decision-making bodies of the Magyar Nemzeti Bank, the treasury accounts managed by the Magyar Nemzeti Bank and the permitted activities of foundations established by the Magyar Nemzeti Bank (CON/2025/12) Introduction and legal basis

On 14 May 2025 the European Central Bank (ECB) was informed by the Hungarian Ministry of the National Economy of draft amendments to (1) the Law on public finance (hereinafter the ‘Law on public finance’); and (2) the Law on the Magyar Nemzeti Bank (MNB) (hereinafter the ‘Law on the MNB’), hereinafter together referred to as the ‘draft amendments’. 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(1), third indent, of Council Decision 98/415/EC , as the draft amendments relate to the MNB. In accordance with Article 17.5, first sentence, of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

1. Purpose of the draft amendments

1.1 According to the explanatory memorandum accompanying the draft amendments, the primary objective of the draft amendments is to enable the MNB to perform its basic central bank and statutory tasks as efficiently as possible. As a part of this objective, it is considered necessary to reduce the activities of the MNB that fall outside [the scope of] its statutory tasks. 1.2 Composition of the MNB’s decision-making bodies 1.2.1 Under the Law on the MNB, the bodies of the MNB are the Monetary Council, the Financial Stability Council, the Executive Board and the Supervisory Board. The Monetary Council is the MNB’s supreme decision-making body, and the scope of its competence includes, inter alia, strategic decisions concerning the MNB’s tasks relating to monetary policy, banknotes and coins, official foreign exchange and gold reserves, foreign exchange operations and the collection and publication of statistical information . The Law on the MNB currently provides that the Monetary Council is to have at least five and at most nine members, comprising the Governor and the Deputy Governors of the MNB and other members elected by the National Assembly for six years. The combined number

of the Governor and Deputy Governors of the MNB must be less than the number of Monetary Council members elected by the National Assembly. Moreover, the number of Monetary Council members elected by the National Assembly must be less than twice the combined number of the Governor and Deputy Governors of the MNB . 1.2.2 The Executive Board of the MNB is responsible for implementing the decisions of the Monetary Council and of the Financial Stability Council, as well as for managing the operations of the MNB . The members of the Executive Board are the Governor and Deputy Governors of the MNB . The Law on the MNB currently provides that the MNB is to have at least two and at most three Deputy Governors . 1.2.3 According to the draft amendments, the MNB will have at least two and at most four Deputy Governors, and the number of members of its Monetary Council will be at least five and at most eleven. The explanatory memorandum clarifies that the increase of the maximum number of members of the Monetary Council is due to the possibility to appoint a fourth Deputy Governor, i.e. to ensure that the number of Monetary Council members elected by the National Assembly continues to exceed the combined number of the Governor and Deputy Governors of the MNB, thereby maintaining the ratio set out in the Law on the MNB as it currently stands. 1.3 Treasury accounts managed by the MNB 1.3.1 The Law on public finance currently provides that the Hungarian State Treasury disposes of a Hungarian forint (HUF) account at the MNB called the single HUF treasury account, and the Treasury may hold single foreign currency treasury accounts . The MNB is to pay interest to the central budget on the current balance of (1) the single HUF treasury account at the market interest rate but not exceeding the central bank base rate; and (2) the single foreign currency treasury accounts at the market interest rate, with due regard to the prohibition of monetary financing when determining such rate . 1.3.2 The draft amendments entitle the Hungarian State Treasury to hold other foreign currency accounts and custody accounts at the MNB; the latter are to be used for the separate management of funds in connection with the statutory custodial activities of the Treasury. In accordance with the draft amendments, the MNB is to pay interest to the central budget also on the current balance of the other foreign currency treasury accounts at the market interest rate, with due regard to the prohibition of monetary financing when determining such rate. 1.4 Permitted activities of the foundations established by the MNB The Law on the MNB currently provides that in line with its tasks and primary objective, the MNB may establish a business association in which it has a majority holding or may establish a

foundation . The draft amendments add that the MNB may not establish asset-management foundations, and the foundations established by the MNB must not carry out investment, asset management activities or other financial transactions as an economic activity. This provision is not to apply to foundations established before the entry into force of the draft amendments.

2. Duty to consult the ECB on the draft amendments

2.1 The Hungarian Ministry of the National Economy has informed the ECB about the draft amendments ‘for full transparency’ and asked the ECB to provide comments on them, should it wish to. The draft amendments were submitted to the Hungarian National Assembly by its Committee on Economics. 2.2 Under Articles 127(4) and 282(5) of the Treaty and Article 2(1) of Decision 98/415/EC, the authorities of Member States must consult the ECB on any draft legislative provision that falls within its fields of competence. 2.3 Under Article 3(1) of Decision 98/415/EC, the authorities may set the ECB a time limit for the submission of its opinion, which may not be less than one month from the date on which the President of the ECB receives notification to this effect. Article 3(2) of Decision 98/415/EC allows for the reduction of the time limit in cases of extreme urgency, the reasons for which must be stated. Furthermore, in accordance with Article 4 of Decision 98/415/EC, the ECB should be consulted at an appropriate stage, which enables the authority initiating the draft legislative provision to take the ECB’s opinion into account before it decides on the substance. This implies that national procedures should ensure that the consultation takes place at a point in the legislative process which affords the ECB sufficient time to examine the draft legislative provisions and to adopt its opinion . 2.4 The ECB reiterates that the draft amendments fall within the ECB’s fields of competence under Article 2(1), third indent, of Decision 98/415/EC, as they concern a national central bank (NCB) in the European System of Central Banks, in this case, the MNB. Since the draft amendments were proposed by a parliamentary committee, the ECB invites the Hungarian National Assembly to take note of the obligation to consult the ECB on the draft amendments .

3. Observations on the draft amendments

3.1 The ECB takes note of the increase in the number of Deputy Governors of the MNB and, consequently, the number of members of the Monetary Council of the MNB under the draft amendments. 3.2 The ECB welcomes that the draft amendments provide that the interest paid by the MNB to the central budget on the current balance of the other foreign currency treasury accounts cannot exceed market rates, and that when setting the interest rate for these accounts the MNB will have due regard to the prohibition of monetary financing. The ECB refers in this respect to Decision ECB/2014/8 of

the European Central Bank , which sets out the criteria applied by the ECB regarding the remuneration of government deposits by NCBs for the purposes of monitoring compliance with the monetary financing prohibition laid down in Article 123(1) of the Treaty . Regarding the reference to custody accounts held with the MNB for the separate management of funds in connection with the statutory custodial activities of the Treasury, the ECB understands that the funds credited to these accounts are not remunerated. 3.3 Taking particular account of the scope, number and size of the foundations established by the MNB over time, the ECB welcomes that the draft amendments restrict the permitted activities of foundations established by the MNB.

This opinion will be published on EUR-Lex.

Done at Frankfurt am Main, 27 May 2025.

[signed]

The President of the ECB

Christine LAGARDE