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Hungary's government-dominated parliament approved a slightly amended bill aimed at increasing state control over the country's savings banks on July 5. Despite continued objections from across the financial sector, the president - who vetoed the original bill - has no option to block it again.

The first version of the Savings Banks Act caused a storm amongst the cooperatives it will affect earlier this week. It was sent back by President Janos Ader - a close ally of Prime Minister Viktor Orban - on technicalities. Parliament has now passed another version containing cosmetic amendments. Under the constitution, Ader cannot send the same legislation back to parliament twice, reports Reuters.

The bill will see the government spend HUF100bn to integrate Hungary's savings cooperatives under Takarekbank, in which state development bank MFB consolidated control via an acquisition of 38% last year. The plan is for the state to acquire "an important ownership position" in the cooperatives via share purchases by the Hungarian Post Office, according to the original bill.

The affected cooperatives have loudly objected - mostly via the Hungarian Savings Banks Association's chairman Sandor Demjan - to the idea since its sudden introduction to public discourse in late June. Without offering his reasons, Takarekbank CEO Peter Csicsaky resigned on July 1, just ahead of approval of the original bill by parliament.

The move is seen as a means to increase the state's leverage in a banking sector that has practically stopped lending due to the sluggish economy and harsh treatment handed out by Budapest, which has seen the banks pull back on investment in the country. Desperate to maintain a constitutional majority at next year's parliamentary elections, Orban needs to turn that around.

The urgency to offer the electorate some brighter prospects has already sparked a scheme from the central bank to push cheap loans. The Fidesz-controlled Magyar Nemzeti Bank (MNB) rolled out the Funding for Growth Scheme on June 1, providing 0% refinancing loans worth HUF750bn to commercial banks to lend to small businesses at a margin of no higher than 2.5%.

The move to take control of the savings cooperatives looks another specifically targeted step. The MNB's scheme seeks to sure up support amongst entrepreneurs for the centre-right Fidesz. Despite currently holding just 5% market share overall, the saving's banks have a wide network consisting of 1,600 outlets - close to 40% of bank branches in the country - set amongst the party's core electorate beyond the major urban centres.

Looking at the bigger picture, the push reflects an ongoing state takeover of assets in strategic sectors, which thus far includes energy and autos. Late last year, the PM demanded that "at least 50%" of the country's banks should be Hungarian-owned. While a couple of small-scale deals involving sales by foreign owners have gone through since, and the country's biggest bank OTP claims to be negotiating with more than one potential seller, there's a long way to go to reduce the influence of the major Eurozone groups, which currently control around 90% of the market.

Takarekbank has long been identified by the government as a key asset. Last year, state development bank MFB bought the 38% stake held by Germany's DZ Bank. The local cooperatives hold a 56.6% majority. As the government unveiled its plan to integrate the cooperatives in late June, it also moved to buy 49% stakes in Hungarian-owned Granit Bank and Szechenyi Bank, with plans to increase their capital, local media reports.

Granit, which is jointly owned by Demjan and Takarekbank, has been reportedly discussing the sale of a stake to the state for well over a year. Despite its struggles to fund its appetite for assets, the government sees the bank as a potential base for a state-controlled commercial bank.