Hungary to amend brokerage compensation legislation

By bne IntelliNews December 2, 2015

Hungary’s government will discuss amendments to legislation regarding compensation for victims of failed brokerage Quaestor after the constitutional court declared some parts of it unconstitutional, local media reported on December 2.

Quaestor collapsed early this year after it was found to have issued more than HUF150bn (€480mn) in bogus bonds. It was the third brokerage in rapid succession to have its licence suspended in February. The licences of Buda-Cash and Hungaria Ertekpapir were earlier revoked.

The trio is suspected of fraud involving around €1bn in total. In April, a central bank official estimated the collapse of Quaestor and the other small brokerages would cost the financial sector around HUF30bn per year over the next 10 years.

In April, parliament approved a bill that seeks to compensate Quaestor clients by as much as HUF30mn each. A special compensation fund was set up loading a chunk of the costs onto Hungary's embattled banks.

Amendments that are expected to be discussed by the government include a lower contribution from banks to the bailout fund. Moreover, lenders will be allowed to deduct the Quaestor-related payments from their corporate tax base under the amended legislation, Magyar Nemzet reported, citing justice ministry state secretary Pal Volner.

Along with complying with the court’s ruling, the government is also seeking to respect a peace deal with the banking sector, reached via an agreement with Austria’s Erste and the EBRD. Erste has claimed the government is breaking the deal by making the financial sector pay for the losses at the brokerages.

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