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Hungary to change bank levy rules, following EC objection

The Hungarian government decided at a cabinet meeting on Wednesday to modify rules on the bank levy due to objections by the European Commission, Hungary’s National Economy Minister Mihály Varga said late Friday, according to a report by Hungarian news agency MTI today.

The changes will establish the foundation for a reduction in the bank levy in 2016, Varga said.

Regulations governing the bank levy would probably have to be modified due to objections by the European Commission to two elements of the rules pertaining to Hungaryʼs agreement with the European Bank for Reconstruction and Development (EBRD), National Economy Minister Mihály Varga said at a conference on November 12.

The EC has objected to a HUF 10 billion tax preference offered to banks to boost their lending activity during the global financial crisis, as well as a rule that allows deductions for losses by local lenders in Ukraine and Russia due to destabilization, Varga said at the conference organized by business daily Vilaggazdaság.

Under the agreement with the EBRD signed in February, Hungary committed to a reduction in the bank levy and said it would acquire a 15% stake in the local unit of Austriaʼs Erste bank.

Varga noted "uncertainty" on the part of Erste concerning the transaction, but said the government still wished to acquire the stake in Erste Bank Hungary.

"We did not sign an agreement in February with the EBRD and Erste that included the bank levy reduction from next year, to score points with banks, but to help boost lending by banks", said Varga.

The minister said economic growth in Hungary is happening without a real increase in lending but the government hopes that "a reduction in the bank levy will be matched by an increase in lending".

Varga stressed the importance of the ECʼs objections not having an impact on the deal between the EBRD and Erste.

Varga also noted that the state is not planning to sell its stake in Hungarian companies in the near future, including its shares in oil and gas company MOL and drugmaker Richter.