The Magyar Nemzeti Bank is the central bank of Hungary. The MNB is a member of the European System of Central Banks.

The MNB and the members of its decision-making bodies shall be independent in carrying out the tasks and meeting their obligations conferred upon them by the MNB Act, and shall neither seek nor take instructions from the Government, the institutions and bodies of the European Union, the governments of its Member States and any other bodies, except from the European Central Bank.

The primary objective of Magyar Nemzeti Bank (the central bank of Hungary) is to achieve and maintain price stability. Without prejudice to its primary objective, the Magyar Nemzeti Bank supports the economic policy of the Government, using the monetary policy instruments at its disposal. Further tasks of MNB are:

• holding and managing official reserves in foreign currency and gold;
• developing and monitoring the payment and settlement systems issuing forint banknotes and coins (exclusive right of cash issuance);
• collecting and publishing statistical information setting and publishing official exchange rates promoting the stability of the financial system.

History

At the beginning of the 19th century Hungary was ruled by the House of Hapsburg. Central banking functions in the Empire were first carried out by the Austrian National Bank which was founded on July 1, 1816 and later by the Austro-Hungarian Bank founded on September 30, 1878, which operated on a parity basis. During the revolution and war of independence of 1848-49 the first independent Hungarian government commissioned the Hungarian Commercial Bank of Pest as the central bank. As a result of the First World War, the Austro-Hungarian Empire crumbled and the Austro-Hungarian Bank was dissolved. The functions and responsibilities of a central bank were assumed by the Royal Hungarian State Bank, which was established on July 11, 1921.

The first independent Hungarian central bank, the National Bank of Hungary, commenced operations on June 24, 1924, in the form of a company limited by shares. The Bank's first President was Sándor Popovics. The Bank was able to stabilize the crown, which had suffered from inflation since the First World War, and then moved on to issue a new currency, the pengo. The Bank also began maintaining the state's accounts and managing its debts. Through its interest rate and credit policies, its bill discounting principles and practices, it controlled the flow of credit in the country and influenced the operation of the banking system. Management of foreign exchange matters was also placed under the Bank's control. It has been a shareholder and active member of the Bank for International Settlements since the founding of this institution in 1930.

The financial crisis caused by the world-wide economic depression in 1929 reached Hungary in July of 1931. From this time on, until the beginning of the 1990's, the National Bank of Hungary has been the authority responsible for foreign exchange deposits, has attended to official duties in this area and has operated as a central bank with responsibilities and powers in the field of economic policy. During the Second World War the national currency, the pengo, fell prey to inflation despite the efforts of the National Bank and following the war, the pengo's loss in value produced the largest depreciation in history.

With the co-operation of the National Bank of Hungary the new national currency, the forint, was introduced on August 1, 1946. Following the nationalization of the Hungarian-held stocks of the large banks and the central bank at the end of 1947, the banking system was rapidly restructured: commercial banks and saving banks were liquidated and the banking system was reduced to a single-tier system. Starting from the second half of 1948, the National Bank of Hungary also conducted commercial banking activities, in addition to its responsibilities as the central bank. As a nationalized central bank, its management was a responsibility of the government.

On January 1, 1987 Hungary returned to the two-tier banking system. With a few exceptions most of the system, branch offices and clients of the new commercial banks which were established were drawn from the National Bank of Hungary. The Act on the National Bank of Hungary, passed in October of 1991 and amended several times since then, reinstated the independence of the Bank and re-established its range of duties.

Pursuant to Act LVIII of 2001 on the Magyar Nemzeti Bank, the Government decides on the choice of exchange rate regime in agreement with the MNB. With effect from 26 February 2008, the forint exchange rate has been floating freely vis-à-vis the euro as a reference currency, with movements in the forint determined by the interaction between the forces of supply and demand.


Fiscal Council Function

The Governor of the Magyar Nemzeti Bank is also a member of the Fiscal Council, and the Magyar Nemzeti Bank is one of the professional institutions supporting the work of the Fiscal Council. In particular, the Magyar Nemzeti Bank regularly publishes the "Public Finance Review". The Review aims to assist the Fiscal Council in a transparent manner in performing its functions as required by law and the Constitution which came into effect on 1 January 2012. The findings set out in the Review reflect the views of the analytically areas of the Magyar Nemzeti Bank contributing to the Review and should not be interpreted as the official views of the Fiscal Council, the Governor of the Magyar Nemzeti Bank or the Magyar Nemzeti Bank.


The role of the Central Bank of Hungary

There is general global consensus today that the responsibility for system stability – in addition to the monetary regulation function – defines key objectives and tasks for central banks, regardless whether the organisation exercising money and capital market supervision rights operates within or outside of the central bank organisation. Central bank responsibility related to the stability of the financial system and its tasks are traditionally based on 3 important cornerstones:

• Macro-prudential analysis, system risk monitoring applied to bank and non-bank intermediaries, and occasionally intervention (e.g. lender of last resort);
• Regulatory policy, participation in the drafting of legislation, modernization and improved efficiency of macro-prudential regulation and regulation unnecessarily restricting the operation of the market;

Responsibility for the function, institutions, efficiency and security of payment and settlement systems and payments, and the related overseer tasks.

The Magyar Nemzeti Bank has the fundamental interest and responsibility – jointly with other government institutions – to sustain and strengthen the stability of the domestic financial system. The role of the MNB in maintaining financial stability is firstly defined by the Central Bank Act, and secondly, legislation regulating cooperation between the Magyar Nemzeti Bank, the Hungarian Financial Supervisory Authority (HFSA) and the Ministry for National Economy.

The Magyar Nemzeti Bank supports and strengthens financial stability with the resources at its disposal, and manages the shocks affecting the financial system, when necessary. As part of this activity, the MNB carries out comprehensive and regular analyses of the macroeconomic environment and the operation of financial markets, domestic financial intermediaries and the financial infrastructure. It also identifies the risks that may threaten the stability of the financial system and recognizes the elements, processes contributing to the vulnerability of the financial system.

For the purpose of the efficient performance of the above tasks and the advancement of the analytically methods of financial stability, it conducts research on topics relating to financial stability and publishes the results. In the framework of the above task, it devises and further develops the models describing the behavior of the banking sector and its interaction with the macro environment, using these to conduct stress tests.


International Relations

The Magyar Nemzeti Bank (MNB) lays special emphasis on its international relations and on participation in the professional forums of international economic institutions and financial organisations (EU, IMF, OECD, BIS). EU integration is of high priority for the MNB, so the accession to the European Union had great importance in the life of the institution. At present, the work of the MNB is mainly determined by carrying out the duties resulting from EU membership at a high professional level, and by getting prepared for the prospective entry to the euro area.

In contrast to the 1980s and the larger part of the 1990s, when the development institutions (the World Bank Group, EBRD) and the International Monetary Fund (IMF) played the most important role in Hungary’s international financial relations, in the past few years it has been co-operation with institutions of the European Union [European Central Bank (ECB), Directorate General Economic and Financial Affairs of the European Commission, Economic and Financial Committee (EFC) responsible for the preparation of ECOFIN] and the central banks of the European Union which has best characterized the MNB's international relations.

In addition to the above mentioned organisations and institutions, the MNB maintains bilateral relations with numerous central banks in the world.

Useful links

Currency of Republic of Hungary:

Hungarian forint

List of Central Banks:

Central Banks

Official website of Hungarian National Bank:

english.mnb.hu

Balance of Payments, International Investemnts Position:

english.mnb.hu

Report of Financial Stability:

english.mnb.hu