Hungary's govt proposes new central bank bill to weaken governors powers.

By bne IntelliNews December 15, 2011
Hungary's government has tabled for discussion in Parliament a new central bank act, which will again restructure the monetary council and will set new lower ceilings for salaries, MTI news agency reported. The changes in the monetary council envisage an increase in the members from the current seven to nine. At the moment, the council includes the governor, his two deputies and four members, appointed by the Parliamentary economic committee. Under the new structure, the deputy governors will be three, but they would be proposed by the prime minister, rather than the governor himself. It was namely the restriction of rights to appoint council members that faced strong opposition from the central bank and critique from international institutions, when last year the government made the first changes in the structure. A year ago the European Central Bank issued a statement regarding the appointment of monetary council members by the parliament, pointing out the importance of having an independent central bank in order to preserve a stable monetary policy. The ECB emphasised the need to separate monetary policy from the influence of short-term political interests. The newly proposed legislative amendments would also give power to the government to require extraordinary reports from the governor on banks' activities and monetary policy. So far only the parliament could request such reports. Moreover, the salaries of governor, deputy governors and council staff will be capped, as the money the governor gets will be set as a benchmark and all other salaries will be calculated in relation to that amount. In related news MTI informed that the parliament's constitutional affairs committee suggested another substantial change - the merger of Hungary's central bank and the country's financial market regulator PSZAF into a new institution. The authority will be led by the president of the republic, while the bank's governor and the financial watchdog's director will be vice presidents.

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