Hungarian Prime Minister Viktor Orban has a track record of falling out with his old friends, only to replace them with new. As part of the latest such spat, speculation on June 14 said he plans to push lender FHB from its role controlling the country’s saving cooperatives, replacing it with MKB - the bank privatised to mysterious buyers in April.

Zoltan Speder, chairman of Hungary's second-largest listed bank FHB has clearly fallen from favour after years of working closely with the Fidesz government. In recent weeks, the oligarch has found himself and his businesses the subject of a harsh media campaign, as well as unfavourable legislation, a fine from the central bank, and investigations by both the police and the tax authority. The sudden activity around FHB only serves to illustrate that the rule of law in Hungary is anything but impartial.

The speed and coordination of the attack on a member of Hungary’s elite is unprecedented. There are those that suggest it testifies to severe interpersonal tension somewhere in the system, particularly in light of the high standing that Speder has enjoyed in recent years.

Good times

Formerly the deputy CEO of OTP, Speder left Hungary’s biggest bank after 15 years in 2006 amid disputes with boss Sandor Csanyi. He bought a stake in FHB in 2007 with, he says, a plan to build a new, strong financial institution. The Fidesz government came to power in 2010, with an increase of domestic ownership in the banking sector a flagship policy. Little wonder then that it supported Speder's efforts to expand his influence.  

The network of savings cooperatives, which currently constitutes 88 small local banks - with more than 1,500 branch offices and over one million customers mainly in the Hungarian countryside - played an important role in the government’s push for have over 50% of the banking sector owned by Hungarians. In 2013, Orban asked Speder to organize their integration, and commissioned Janos Lazar, leader of the Prime Minster’s Office to supervise.

While FHB took control of the Takarekbank, the central institution of the saving network in 2014 in a controversial deal, the government has been criticized for supporting the saving cooperatives, creating an uneven playing field and contributing to subdued lending by commercial banks. However, such good times appear over for Speder.

“It’s not only that the government had been tolerating FHB’s activities, but it was the government that had put it in such a favourable position. Up until now, the government very much liked FHB, and now suddenly it doesn’t,” Ambrus Kiss, a political analyst at Policy Agenda, remarks to bne IntelliNews.

Under fire

Speder was under heavy fire from all sides in early June. Sandor Demjan - Hungary’s third richest man - accused FHB of using Takarekbank to finance losses, while the Hungarian Banking Association openly criticized the government’s policy on the savings cooperative.

On June 7, the Hungarian parliament passed a bill extending the central bank’s oversight on the cooperatives network. The same day, the Magyar Nemzeti Bank (MNB) announced on its website that it has fined FHB HUF105mn (€338,000) for market manipulation over a 2012 euro-denominated bond issue.

Two days later, police raided the offices of FHB and other business interests of Speder on suspicion of fraud. Hungary’s tax authority has announced a comprehensive tax audit of Speder’s media company: CEMP Zrt, publisher of well known platforms Index.hu and Portfolio.hu.

“The fact that after years, suddenly the police, the tax authority and MNB started acting at the same time against FHB is suspicious," Kiss agrees. "This story shows that the government is capable of stepping up in an extraordinarily aggressive manner if its own interests are threatened.” 

"At the same time," he adds, “if all financial institutions are supervised by MNB, and the saving cooperatives weren’t, it is good that this situation has been resolved. But why did the government let the saving cooperatives to be exempt from MNB control in the previous years?”

Opposition parties claim that attack on Speder is politically motivated, and accuse Fidesz of using supposedly independent institutions for its own means. “In Orban’s regime, it’s not a problem if you commit a crime (…) only if it’s against Orban’s interest,” the Egyutt party claims. The Hungarian Socialist Party (MSZP) complained “it is completely irrelevant in whose interest this was, Hungarian taxpayers are going to pay the price.”

However, Speder and his shareholders are also paying. FHB shares – which are partly owned by MNV, the Hungarian National Asset Management Inc - traded at HUF709 On June 6, but have since dropped to HUF524, their lowest level since 2014.

The reasons for Fidesz’s unexpected turn against Speder are unclear. Some suggest that FHB was attempting to organise FHB, the saving cooperatives, Hungarian Post and ENKSZ (First National Utilities Company) to build a competitor to OTP, and that Csanyi has pushed the for Speder’s wings to be clipped.

A plan for Takarekbank to buy a majority stake in FHB may have been the trigger for the action suggests Kiss. “If the purchase had been concluded it would have meant such a high level of integration that would have been irreversible,” he said.

At the same time, the harsh campaign against Zoltan Speder in the government-friendly media points to aims that go beyond reducing the influence of FHB in the banking sector. “Media reports came as road rollers on Speder, which suggests that the aim is to wreck Speder personally, and maybe also force him to sell his media portfolio,” Kiss said.

With Fidesz’s eyes already on the 2018 elections, analysts point out that Fidesz is likely to aim to increase the number of government-friendly media outlets. Lokal, a free daily paper launched in June by Prime Minister Orban’s Viktor top advisor Arpad Habony, already replaced Metropol - owned by Lajos Simicska, who fell out with Orban last year - at major state owned outlets.

Simicska, formerly one of the closest allies of Orban and the most frequent winner of valuable state tenders, broke with the prime minister in a salty outburst in 2015, incensed at what he viewed as the "traitorous" defection of senior editors at his three principal media outlets. After the break, Simicska’s company was excluded from all public procurements for three years, which was recently found unlawful by the European Commission.

“This story of Speder is more differentiated than the clash with Simicska. It concerns the entire portfolio of a strong government official, Janos Lazar. Without the approval of Lazar, Speder could not be completely set aside, and Lazar assured Speder of his support,” Kiss insists.

Lazar, who supervises the integration of saving cooperatives, told journalists at a press conference on June 9 that “Zoltan Speder is my friend, and he will continue to be”. The official added that it “cannot be unnoticed how fiercely he is being attacked. We are ready for any parliamentary and legal investigation."

At the same time, FHB claimed in a statement on June 10 that it operates according to laws and in compliance with all regulations. "The banking group is not about to change its strategy and operation,” FHB wrote.

“It is difficult to foresee the consequences. It is sure that the present situation cannot be maintained, but Speder will not be defeated in a spectacular way,” Kiss speculates. However, according to 444.hu there are market rumours suggesting Orban wants to replace Speder with the new owners - whose identity is yet unkown - of MKB Bank.

However, it's unlikely that a complete takeover would happen in the near future. “It seems that the government won’t let the integration become too tight. It is questionable whether they can replace FHB as the leader of the integration, but the government might share FHB’s leading role with another bank,” Kiss suggests.