Bokros: MNB ownership of bourse unprecedented, risky

History

The Hungarian National Bankʼs ownership of the Budapest stock exchange poses great risks for conflicts of interest that could hurt the credibility of both the bank and the exchange, opposition politician Lajos Bokros wrote in a December 10 Financial Times piece.

“It is absolutely unprecedented for a central bank to own and manage a recognized securities exchange,” said Bokros, who was the first chairman of the Budapest Stock Exchange after its reopening in 1990 and was finance minister in the mid 1990s.

“There are precedents for governments owning and managing stock exchanges. The most important example is the Shanghai Stock Exchange in China. It is a suboptimal arrangement because governments usually pursue their short-term economic policy priorities, which may also come into conflict with those of investors. This can often be seen in China, whenever the central government wants to see higher prices in the secondary market or wishes to prevent prices from falling in a precipitous way,” Bokros writes. “The new Hungarian arrangement is even more harmful. It represents the worst practice imaginable. There is no precedent in the whole world for a monetary authority to own and control a stock exchange. The reason for this is quite simple: It creates an outright conflict of interest, potentially destroying the credibility of both institutions.”

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