Court rules National Bank of Hungary must account for use of public funds

February 4, 2016


Hungarians are one step closer to learning how much money has been spent by the Hungarian National Bank (MNB) on things unrelated to its mandate.

The Budapest Court has upheld a lower court ruling that all funds held and managed by the central bank are public funds, and all assets acquired by the central bank are national assets.  The court ordered MNB to release information requested by a Hungarian Socialist Party (MSZP) parliamentarian within fifteen days.

The court further ruled that bank Governor György Matolcsy’s foundations must release documents supporting the bank’s decision to spend public funds in the hundreds of billions.

Under the governorship of Matolcsy, MNB has spent HUF 250 billion (USD 902 million) endowing foundations.

To date, MNB has refused to disclose any financial information about the foundations’ operations on the spurious grounds that the funds are not public funds but rather central bank “profits”.

MSZP parliamentarian Bertalan Tóth sued MNB after it refused to release financial information about the so-called Pallas Athéné foundations and the central bank’s reasons for establishing them in the first place.

The court rejected MNB’s claim that the foundations are not obliged to account for the use of the public funds and ordered the Pallas Athéné Domus Animae Foundation to release the information requested by Tóth within 15 days.

Other court rulings pertaining to the central bank’s other foundations (the Pallas Athéné Domus Scientiae Foundation, the Pallas Athéné Geopolitikai Foundation, the Pallas Athéné Domus Concordiae Foundation, the Pallas Athéné Domus Mentis Foundation and the Pallas Athéné Domus Innovationis Foundation) are pending, according to Tóth.

The National Bank of Hungary has been the subject of considerable controversy since career Fidesz politician and former minister for national economy Matolcsy was appointed governor in 2012.  Under his reign, the central bank has asserted its influence in areas surpassing that of managing monetary policy.

In acquiring numerous buildings and objets d’art last year, MNB purchased the Budapest Stock Exchange (BÉT), a move that BÉT’s first president, former minister of finance Lajos Bokros called “an outright conflict of interest.”

“Government securities are the most important instrument for conducting monetary policy,” Bokros said. “The central bank cannot be on both sides of the table, managing and regulating an institution which is trading with government securities, and being one important player of the market which is using these securities for monetary policy purposes.”