Resolution Authorities and their institutional settings in EU Member States (Country Report on Hungary)

There is one resolution authority in Hungary; the MNB, which is the Central Bank of Hungary, and as such, part of the European System of Central Banks. The MNB fulfills central banking as well as both ‘competent authority’ (financial supervisory authority) and ‘resolution authority’ functions. The advantage of this type of organizational structure is that in case of a liquidity crisis, when the central bank needs to act as lender-of-last-resort, as it is the supervisory authority too, it has all information concerning the financial situation of the financially distressed bank. Hungary has a separate deposit insurance fund (NDIF) and an Investor Protection Fund. Both schemes aim to strengthen investor confidence through providing ex ante, financial sector-funded guarantee of deposits and investments up to a specified limit. In line with EU law, the funds of the NDIF and the Investor Protection Fund may be used for bank resolution purposes within strict limits. Hungary’s participation in the EU’s system-wide insurance scheme against future bank failures in combination with the clear and ample authorization of its government and central bank for crisis management provides a relatively strong safety net for future financial instabilities.