Reports show Hungary's central bank head controlled foundation funds

By bne IntelliNews May 2, 2016

The pressure on Gyorgy Matolcsy, governor of the Hungarian central bank, continues to mount, despite the support of Prime Minister Viktor Orban. Data released on May 2 reveals the head of the Magyar Nemzeti Bank (MNB) made direct investment decisions at one of the central bank's charitable foundations.

The ruling Fidesz party has repeatedly claimed that the six charitable foundations – which received €790mn from the MNB in 2014 – operate independently from the central bank. However, this argument is clearly undermined by the recent releases of contracts issued by the foundations after Budapest failed in a bid to remove them from public scrutiny. Local press reported on May 2 that Matolcsy had direct control of the funds of the Pallasz Athene Domus Animae (PADA) Foundation.

Following a Constitutional Court rule that prohibited keeping the foundations’ spending behind close doors, the MNB's foundations published a partial list of their contracts. They show that around HUF20bn was spent without announcing public procurements, granting a significant amount of funds to people close to Matolcsy. 

When the MNB was asked whether Matolcsy will step down over the scandal, the central bank retorted that there is no reason  for him to resign, as the foundations have no ties to the central bank. “The foundation is a separate legal entity (…), and its management is carried out by a Board of Trustees,” the MNB wrote.

However, the statement failed to mention that Matolcsy also serves as the chairman of that board. In fact, the foundation’s contracts - obtained after a court case pursued by the opposition MSZP lasting over a year - showed that it was Matolcsy and another unnamed member of the board that decided where the fund should place its money.

According to the documents, Matolcsy decided in 44 cases about PADA’s investments. Although the total amount of investments remain uknown, PADA’s contracts show that most of the funds were invested at NHB Bank, which is owned by Matolcsy’s cousin Tamas Szemerey, and its predecessor evoBank. Billions of forints were spent on Hungarian government securities, and PADA also acquired nearly HUF15bn worth of Italian government securities.


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