Student A
Hungarian National Bank
The Hungarian National Bank is the central bank of Hungary. The principal aim of the bank is to retain price stability. It is also responsible for issuing the national currency, the forint, controlling the cash circulation, setting the Central Bank base rate, publishing official exchange rates and managing the national reserves of foreign currency and gold to influence exchange rates. It controls the country's monetary policy.
The MNB maintains a medium-term inflation target of around 3%. This is somewhat higher than the generally accepted level of inflation for price stability in Europe, and it is used in order to allow for Hungary's "price catch-up" to the rest of Europe.
The president of the Hungarian National Bank is appointed by the President of the Republic at the proposal of the prime minister for a term of 6 years. The most important decision-making body of the Hungarian National Bank is the Monetary Council. The building of the Hungarian National Bank is located on Hold Street, in the Inner City of Budapest. It can be found next to the building of the US embassy.
According to Hungary's Central Bank Act, which founded the Hungarian National Bank, "The primary objective of the MNB shall be to achieve and maintain price stability. Without prejudice to its primary objective, the MNB shall support the economic policy of the Government using the monetary policy instruments at its disposal."
Hungary is currently slated to join the Euro in 2010, thus divesting the MNB of most of its powers. However, central bank leaders have criticized this plan, saying that the fiscal austerity requirements would slow Hungary's growth..
Student B
The major tasks of MNB:
the bank of issue and the central bank of the national economy
protection of the internal and external purchase power of the national currency
influences money and credit supply and demand and forms the monetary policy
The MNB relies primarily on 4 instruments to control the country's economy via the banking sector:
setting the size of mandatory reserves for commercial banks
setting the prime interest rate
open-market operations (e.g. selling bonds to the public)
discount rate
keeps the accounts of the state and may also grant credit to the central budget
central body of the foreign exchange policy
The banking system, along with the capital market and the insurance and pension fund markets, is controlled by one authority: the State Supervision of Financial Organizations (PSZÁF), created by the merger of three supervisory bodies in April 2000.
Hungary's legislation has opted for “universal banking” as opposed to the U.S. practice of separate commercial and investment banking. Since 1999 banks with appropriate licenses are entitled to provide the full range of securities transactions, including trade in stocks and publicly placed corporate bonds, in addition to commercial banking services.
By the end of 1999, credit institutions in Hungary numbered 260, of which 43 operated in the form of joint stock entities and 217 in the form of cooperative institutions (savings and credit cooperatives). In recent years there has been a tendency for increasing concentration, and both the numbers of joint stock banks and cooperative institutions declined. Ten major banks represent 73 percent of the total banking activities at present. The concentration is more striking in the retail sector where the National Savings Bank (OTP) has a dominant position and ten major banks control about 90 percent of the market.