Magyar Nemzeti Bank
The Magyar Nemzeti Bank (MNB) is the central bank of Hungary. Its primary task is to achieve and maintain price stability, but its main goals also include providing financial information and education, as well as the development of a responsible financial mindset and culture of the population and the economic operators.
The MNB, and its decision-makers, in the performance of their statutory tasks, enjoy independence from the Government, the institutions and bodies of the European Union, the governments of the EU member states or any other body, with the exception of the European Central Bank. The MNB is a member of the European System of Central Banks.
The basic tasks of the Magyar Nemzeti Bank are:
It Defines and implements monetary policy, guards price stability and thus keeping inflation low.
The bank supports and strengthens the stability of the domestic financial system, and dampens short-term fluctuations in the economy, thereby helping growth.
It issues banknotes and coins, ensuring that there is always a sufficient supply of secure, high-quality currency available to the economic operators. The issuance of money is the monopoly of the central bank. In addition to banknotes and coins, the MNB regularly issues commemorative coins in connection with significant historical, scientific and cultural events and anniversaries in the country.
The bank supervises and regulates cash and settlement flows and controls settlement systems.
The European institutions with central banking tasks were founded on the model of the Bank of England, which was established in 1694. The demand for an independent national bank intensified in Hungary already in the reform era, as the Hungarian Parliament complained that, as of the founding of the Austrian National Bank (1816), the management of Hungary’s cash flow was entrusted to an Austrian “private banking institution”. Politicians of the reform era considered this lagging model as one of the most serious national problems of the age. Thanks to the action of the National Assembly, the First Austrian Savings Bank, established in Vienna in 1818, established branches in Hungary in 1827-28. Savings banks were the first in the line of Hungarian financial institutions, the financially strongest of which was the First Savings Bank Association (1839) in Pest, associated with the name of András Fáy, which was the first to deal with lending among the similar institutions. After that, after ten years of authorisation, the Hungarian Commercial Bank of Pest was established, which, in addition to lending, also dealt with discounting, giro and deposit transactions.
The establishment of an independent Hungarian central bank also appeared among the demands of the revolution of 1848-49. At the suggestion of Lajos Kossuth, the Hungarian Commercial Bank of Pest performed central bank functions during the revolution and the war of independence. At that time, the institute issued the first independent Hungarian banknotes, the so-called Kossuth notes, the precious metal (gold and silver) coverage of which was collected by the government from public donations.
The peace treaty, which ended World War I, provided for the resolution of the Austro-Hungarian Bank. The functions of the central bank were temporarily taken over by the Royal Hungarian Note Issuing Institute, established on 11 July 1921, the seat of which was the palace of the former main institution of the Austro-Hungarian Bank in Budapest. The establishment of the Magyar Nemzeti Bank was finally provided for in Act V of 1924, which entered into force on 26 April.
The Magyar Nemzeti Bank began its activities at the general meeting held in the ceremonial hall of the Academy on 24 May 1924, under the leadership of Sándor Popovics, the former head of the Note Issuing Institute. As one of the first measures of the new central bank, it stabilised the inflated krone with the help of loans from the League of Nations, and then in 1926 issued a new, value-preserving currency, the pengő.
The Magyar Nemzeti Bank took over the management of public accounts and the management of public debt. It controlled the country’s credit scene with its fiscal policy and influenced the operation of the banking system. It was also responsible for overseeing foreign exchange management. From 1930, the central bank became a shareholder and member of the Bank for International Settlements (BIS).
As a result of the Great Depression, from 1931, the Magyar Nemzeti Bank became responsible for the management of the state’s foreign exchange and for the related official activities. Despite the efforts of the central bank, during World War II, the pengő had inflated, and after the war, dramatic hyperinflation unfolded. To curb this, the forint was introduced with the help of gold reserves, which were meanwhile returned to the country, which stabilised the financial position.
The first three-year plan was launched in Soviet-occupied Hungary in 1947, and the shares of the Magyar Nemzeti Bank were nationalised in the same year, followed by the nationalisation and complete liquidation of private and commercial banks. From 1948, the central bank also served as a commercial bank, but its management was placed under government authority. As a result of the reorganisation, a single-tier banking system emerged in Hungary temporarily.
Four decades later, as part of the approach towards the Western economies, the two-tier banking system was restored on 1 January 1987, and in 1991, the central bank was restored in its independence and its responsibilities were re-regulated. In the 1990s, the central bank’s monetary policy played a key role in stabilising the forint exchange rate and the economic processes following the change of regime, and in keeping inflation in check.
Since its establishment, the Magyar Nemzeti Bank has had a total of 21 governors. Between 1949 and 1956, the first deputy of the minister of finance held the post of chief executive, but there was no appointed central bank governor at that time. Sándor Popovics was the first governor of the Magyar Nemzeti Bank, whereas currently this position is filled by dr. György Matolcsy.