Hungary’s ruling party Fidesz wants the parliament to adopt new, tougher rules for brokerages, as an escalating scandal is raising concerns for the stability of the country’s financial system, local media reported on March 12.
Over the past few weeks, Hungary’s central bank has revoked or partly suspended the licence of three brokerages over irregularities. The total amount of potential losses at the trio is estimated to exceed HUF315bn (€1bn), the Magyar Nemzeti Bank (MNB) has said.
Speaking to Napi Gazdasag, Fidesz parliamentary group leader Antal Rogan said that new rules should include more frequent checks, consumer protection measures and information technology audits. Moreover, Fidesz aims to make owners and management of brokerages financially liable for any wrongdoings, Rogan added. The parliament could debate the new rules in early April, he said.
Hungary’s brokerage woes started in late February, when the MNB suspended the licence of Buda-Cash, saying the brokerage could not account for about HUF100bn of client cash. Days later, the licences of four banks linked to the brokerage were also revoked.
On March 6, the MNB partly suspended the licence of brokerage Hungaria Ertekpapir due to “irregularities”. The third brokerage to face regulatory action was Quaestor. Its licence was revoked on March 10 on suspicion that the company may have issued bogus bonds worth hundreds of millions of euro.
The ongoing scandal is becoming a political hot potato. After the Fidesz government took effective control over the central bank in 2012, the MNB then took over the role of financial markets regulator. That has prompted criticism from the opposition. However, the government and MNB are pushing the point that the Buda-Cash scandal developed under the previous Socialist administration.
The brokerage scandal also threatens to delay potential upgrades for the country’s credit rating, according to UniCredit analysts, Portfolio.hu reported. Currently all three major ratings agencies rate the country in junk status.
Accelerating economic growth, falling debt and the recently announced deal aimed at reducing the tax burden on the banking sector have raised expectations that Hungary could be moving towards a credit upgrade. The government has been pushing for a return to investment grade since falling into junk. Moody’s refrained from issuing a report on March 6, when it was scheduled to make an assessment on Hungary.
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