Since the early 1990s, the MNB’s international relations have increasingly focused on preparing for European integration and, since 2004, on the tasks associated with EU membership.

The European System of Central Banks (ESCB) and the European Central Bank (ECB)

Hungary’s accession to the European Union also entailed the MNB’s membership in the European System of Central Banks (ESCB). Founded in June 1998, ESCB comprises the European Central Bank (ECB) with its seat in Frankfurt and the national central banks (NCBs) of the Member States of the European Union (EU).

The ECB’s governing bodies are the Executive Board (comprising the President and the Vice-President of the ECB, and four additional members) and the Governing Council, the latter consisting of members of the Executive Board of the ECB and the governors of the NCBs of the Member States participating in the euro area. The third decision-making body of the ECB/ESCB is the General Council, which is responsible for maintaining an institutional relationship between the Eurosystem (meaning the ECB and the Eurozone central banks) and the central banks of non-euro area Member States. Holding its meetings quarterly, the General Council comprises the President and the Vice-President of the ECB and the respective governors of the central banks of all EU Member States. As the MNB is a central bank outside the Eurozone, the governing body with the most significance to its operations is the General Council.

The key responsibilities of the General Council include consultancy concerning preparations for accession to the euro area, approval of the convergence reports of the ECB and monitoring the functioning of ERM II. In addition, the General Council is involved in verifying whether the central banks of EU Member States and the ECB observe the prohibition on monetary financing of the budget and privileged access of the public sector to financial institutions; the General Council also contributes to the ECB’s advisory functions and to the collection of statistical information; it must be consulted in respect of any changes in the rules of accounting and financial data supply, as well as issues related to the adjustment of the ECB’s key for capital subscription. The mandate of the General Council expires after all Member States have adopted the euro.

ESCB members are also owners of the ECB. Their share in the ECB’s capital is established on the basis of the respective EU Member State’s share in the total population and GDP of the EU (i.e. on statistical data compiled by the European Commission). Since 1 July 2013, the paid-up capital of the ECB amounts to EUR 10.825 billion. As set forth in the Statute of the ESCB and of the ECB, the capital keys are adjusted every five years, or whenever the number of national central banks contributing to the ECB’s capital changes. After Brexit, England’s central bank was no longer a member of the ESCB. However, Croatia adopted the euro on 1 January 2023 and the Croatian National Bank thus became a member of the Eurosystem. The ECB’s capital ratios were last adjusted on 1 January 2024, and as a result, euro-area central banks currently subscribe to 81.77 per cent of the ECB’s capital, while the remaining 18.23 per cent is divided among the central banks of non-euro area Member States. These latter central banks pay a pre-defined minimum quota of their respective subscriptions to the ECB’s capital as a contribution to the operational costs of the ECB which are incurred in connection with their ESCB membership. With effect from 29 December 2010, this contribution was defined as 3.75 per cent of the respective subscriptions (it had previously been 7 per cent). On 1 January 2024, the MNB’s capital ratio increased to 1.5819 per cent, bringing the total amount of paid-up capital to EUR 24.749 million.

ESCB Committees

The ESCB Committees and their working groups play an important role in the work of the ECB’s decision-making bodies. The basic role of these committees is to prepare decisions and facilitate coordination as per the horizontal division of various central bank duties, covering all areas of central banking operations from monetary policy through communication to statistical data reporting. The ESCB Committee members include the ECB and experts from the national central banks. Experts from the central banks of non-euro area Member States attend those committee meetings where the agenda includes items affecting the ESCB as a whole and which fall within the competence of the General Council. The committees meet and discuss current issues relevant to their professional areas in ESCB composition, 4–5 times a year on average, according to a schedule determined for a year in advance. The MNB’s senior executives and competent experts also participate in the work of the ESCB committees and their sub-groups. This provides an opportunity to develop shared positions in cooperation with the national central banks, and to keep informed about the activities of the ECB and other national central banks.

Table 1: The ESCB Committees and their activities

Table 2: Other committees assisting the work of the ESCB, and their activities:

Mandatory legal consultations with the ECB

The ECB plays a key role in formulating preliminary opinions on EU-level and national legislative proposals in the area of financial regulation and on legislation directly or indirectly affecting individual national central banks (including the MNB). The process of legal consultations follows a pre-determined procedure, during which the ECB consults all national central banks in order to formulate its opinion. The initiation of the consultation procedure is the responsibility and obligation of the Member State concerned. (However, the ECB is entitled to prepare an opinion on its own initiative, as well, whenever it seems it appropriate based on the legislative proposal in question.)

MNB relations with other EU institutions and fora

European Systemic Risk Board (ESRB)

In response to the global financial crisis of 2008–2009, the European Commission tasked a High Level Group, chaired by Mr Jacques de Larosière, to consider how the European supervisory arrangements could be strengthened. The Group came to the conclusion that supervisory arrangements should not only concentrate on the supervision of individual firms, but also place emphasis on the stability of the financial system as a whole. In 2009, the de Larosière report recommended, among other things, that a Union level body be established with a mandate to oversee risks affecting the entire financial system. The establishment of the European Systemic Risk Board was the result of these recommendations.

The ESRB was established by Regulation (EU) No 1092/2010 of the European Parliament and of the Council for the macro-prudential oversight of the EU financial system. Meanwhile, Council Regulation (EU) No 1096/2010 empowered the European Central Bank to perform specific tasks concerning the functioning of the European Systemic Risk Board. On 16 December 2010 the legislation establishing the ESRB entered into force.

The ESRB is part of the European System of Financial Supervision (ESFS), the purpose of which is to ensure supervision of the Union’s financial system. Besides the ESRB, the ESFS comprises the following authorities: the European Banking Authority (EBA); the European Insurance and Occupational Pensions Authority (EIOPA); the European Securities and Markets Authority (ESMA); the Joint Committee of the European Supervisory Authorities (ESAs); and the competent or supervisory authorities in the Member States as specified in the legislation establishing the three ESAs.

Mandate and tasks of the ESRB

According to the ESRB Regulation: “The ESRB shall be responsible for the macro-prudential oversight of the financial system within the Union in order to contribute to the prevention or mitigation of systemic risks to financial stability in the Union that arise from developments within the financial system and taking into account macro-economic developments, so as to avoid periods of widespread financial distress. It shall contribute to the smooth functioning of the internal market and thereby ensure a sustainable contribution of the financial sector to economic growth.”

Accordingly, the ESRB shall carry out the following main tasks:

• identifying and prioritising systemic risks;
• issuing warnings where such systemic risks are deemed to be significant and, where appropriate, make those warnings public;
• issuing recommendations for remedial action in response to the risks identified and, where appropriate, making those recommendations public;
• when the ESRB determines that an emergency situation may arise, issuing a confidential warning addressed to the Council and providing the Council with an assessment of the situation, which allows the Council to determine whether it is necessary to adopt a decision addressed to the European Supervisory Authorities (ESAs) determining the existence of an emergency situation.
• monitoring the follow-up to warnings and recommendations;
• cooperating closely with all the other parties to the European System of Financial Supervision (ESFS); where appropriate, providing the ESAs with the information on systemic risks required for the performance of their tasks; in collaboration with the ESAs, developing a common set of quantitative and qualitative indicators (risk dashboard) to identify and measure systemic risk;
• coordinating its macro-prudential supervisory activities with the work of international financial institutions, in particular the International Monetary Fund, the Financial Stability Board (FSB), and competent bodies in third countries.

The main decision-making body of the ESRB is the General Board, which is supported by different committees, such as the Steering Committee, the Advisory Scientific Committee (ASC), the Advisory Scientific Committee (ASC), and the Advisory Technical Committee (ATC). The General Board meets four times a year. The Governor of the Magyar Nemzeti Bank is a voting member of the ESRB General Board.

Economic and Financial Committee (EFC)

Upon EU-accession, MNB became a member of the Economic and Financial Committee (EFC), which prepares the meetings of EU finance ministers, the ECOFIN Council. The members of the EFC include 2 representatives from ECB and 2 from the European Commission, along with representatives of EU Member States (both from ministries of finance and from the national central banks). (The MNB also has a presence at the meetings, at the Managing Director level.)

The EFC meets in two formats: either in restricted (only ministries of finance, the ECB and the European Commission participate) or in full composition (when central banks are also involved), depending on topics to be discussed. Meetings in full composition are usually organised 9-10 times per year, with the participation of the central banks. Twice a year, the full composition meetings have a ‘Financial Stability Table’ (FST) section (EFC-FST meetings) as well. These two meetings are attended by the representatives of the new authorities of the European System of Financial Supervision established in 2011 (ESRB, EBA, ESMA, EIOPA), as well. The most important topics discussed by the EFC include the Recovery Fund plans, the Excessive Deficit Procedures, and the coordination of economic policies. During the financial crisis of 2008, the EFC became a workshop for the reforming financial regulations and establishing of crisis prevention and management arrangements at the EU level.

The experts of MNB play an active role in two EFC Sub-Committees: the Sub-Committee on IMF and the Euro Coin Sub-Committee.

ECOFIN Council

Central banks – including the MNB – are directly involved in the work of the ECOFIN Council (i.e. the meetings of EU finance ministers) through the so-called informal Ecofin meetings, which take place twice a year. At these meetings, the finance ministers convene with the heads of the ECB and the national central banks to discuss financial policy issues which are of relevance for the national central banks as well.

European Commission

In Europe, the European Commission’s Directorate-General for Economic and Financial Affairs (DG ECFIN) is also one on the MNB’s important partners. The joint technical work relates to the convergence programme of Hungary, which is to be submitted to the European Commission (MNB participates in commenting the chapters of the programme concerning monetary and exchange rate policy and inflation developments). Furthermore, regular meetings take place among the MNB and DG ECFIN experts on the topics of fiscal policy, budget policy, as well as financial and macroeconomic issues.