MNB purchases yet another expensive real estate!

January 31, 2015


The National Bank of Hungary’s main building in Pest’s Szabadság square

The Hungarian National Bank (MNB) has acquired yet another luxury real estate–this time in Budapest’s exclusive Rózsadomb area.  The bank has acquired a 25,000 sqm property from the Hungarian Academy of Sciences (MTA) for a reported HUF 2.7 billion (USD 10 million).  According to an official statement, the purchase is “compatible with the bank’s social responsibility program” in that it plans to use the property as a “training, education, research and conference center after making the necessary changes and improvements.”

“What is going on in the Szabadság square is like a veterinarian’s horse.  It precisely shows the nature of the National Cooperation System (NER),” former MNB deputy chairman Zoltán Bodnár told ATV’s “Egyenes Beszéd” (Straight Talk) program, adding that “nothing in the world could possibly explain spending this kind of money.”

“The Central Bank earlier announced its intention to acquire HUF 50 billion (USD 185 million) worth of property, of which HUF 20 billion (USD 74 million) has yet to be spent.  However, in the meantime HUF 250 billion (USD 926 million) has gone to its foundations, and there is another HUF 40 billion (USD 148 million) allotted for renovating all the real estate that it has purchased so far.  Altogether that is more than HUF 300 billion (USD 1.1 billion) which is more than 1 percent of Hungary’s GDP.  One person has decided on this amount and his name is (MNB governor) György Matolcsy.”

Bodnár told the same program at the beginning of December that the money given to five foundations is “actually nothing more than a hidden state debt financing by the Central Bank which is strictly forbidden on the part of the Hungarian National Bank.”

He says the basic problem is that these are activities for which the MNB has no authorization of any kind.  He says the Central Bank law is clear about what the bank can and cannot do.   “It is fine for the central bank to acquire the real estate it needs to operate, but that it must account to taxpayers for why it has purchased the country’s most expensive real estate towards that goal,” says the former central bank deputy chairman.

Bodnár told ATV that even though the law governing the State Auditor’s Office (Állami Számvevőszékről – ÁSZ) says that it must audit central bank economic activities falling outside of its basic function, it has only been examining whether these activities satisfy regulations, sub-regulations and general assembly decisions.

He said that considering MNB does not presently have a general assembly, shareholder decisions are exercised by the Minister for National Economy, Mihály Varga, and inspections only consist of verifying that decisions were formally valid, for example that certain decisions were approved by the central bank’s board of governors.

“There were board decisions to purchase the real estate but state auditors are not examining whether this was necessary, warranted, desirable, cost effective,” says Bodnár.

“Effectively the Central Bank is not being audited by anyone.  The Government Oversight Authority (Kehi) does not have any jurisdiction over the MNB.  It would be the responsibility of a supervisory committee, but it is incapable of fulfilling this task because for the moment there is no supervisory committee due to the unlawful neglect of parliament.”

Earlier MNB acquisitions

Hungary’s central bank started acquiring real estate at the end of 2013 with the purchase for HUF 450 million of the former seat of the National Alliance of Industrial Organizations which it then donated to MNB’s own foundation, the Pallasz Athéné Domus Scientiae Alapítvány (PADA) for use as its headquarters.

In the spring of 2014 MNB spent HUF 1.7 billion acquiring the former buildings of the Kecskemét city hospital, which the foundation plans to use as a facility for training “financial experts”.

In the summer of 2014 MNB finally bought something “for its own use”.   First it acquired the so-called Borbély curia for HUF 415 million (USD 1.9 million) for use as an “internal education-training, recreational, sport and holiday” facility.   Then it paid HUF 17.8 billion (USD 66 million) to acquire the exclusive Eiffel Palace office building, reportedly paying substantially more than the original asking price.

Towards the end of 2014 it bought two buildings in the Castle District for donation to PADA .  It paid HUF 3.41 billion (USD 15 million) to acquire a small, 4000 sqm palace designed by Ybl Miklos, where it plans to open a “conference and exhibition center” after making the necessary improvements. The purchase price was HUF 1 billion more than the asking price in 2012.

It also paid HUF 1.85 billion (USD 8 million) to acquire a second landmark building in the Castle District where MNB plans to open an “English language doctoral school” in economics.

MNB has repeatedly emphasized that the purchase of the real estate does not represent a burden on the budget because they are financed from the bank’s “own profits”.  Critics argue that any and all such profits should be remitted to the state treasury.

In addition to real estate, the MNB bought the banking association’s newspaper.