Possible MNB-PSZAF merger seen only after Simor mandate ends, says Rogan

National Bank of Hungary governor Andras Simor will remain in his position until the end of his mandate, and any merger of the central bank and financial market regulator PSZAF will only take place after that, chairman of Parliament’s Economy and IT Committee Antal Rogan said in an interview on commercial television station TV2 on Wednesday.

Mr Simor’s mandate as governor runs until 2013.

Mr Simor said in an interview late Tuesday that there was nothing wrong with the merger in and of itself, but the establishment of a position of authority over the central bank governor and market watchdog head would result in an unacceptable demotion.

A recent government proposal would allow the merger between PSZAF and the MNB as well as establish a chairman’s position above the heads of the two institutions.

Speaking about a letter from Jose Manuel Barroso, in which the European Commission president is reported to have asked Prime Minister Viktor Orban to withdraw bills on the Central Bank Act and the Financial Stability Act, Mr Rogan said Hungary had received many such letters, for example on the bank levy and the crisis taxes. If it had responded to these letters by taking the requested steps, such as Romania did, the country would be in a much worse situation, he added.

Mr Rogan said delegations from the International Monetary Fund and the European Union had made three requests of Hungary: that it reach an agreement with banks in the interest of maintaining the stability of the financial system, that it adjust the budget to growth projections for the rest of Europe and to the expected euro exchange rate, and that it withdraw changes to the Central Bank Act or consult with the European Central Bank on these. He added that the government had reached an agreement with the Hungarian Banking Association on assisting borrowers with foreign currency-denominated loans, among other things; Parliament had approved a budget recalculated for lower growth and a weaker forint; and consultations took place with the ECB. He explained that the ECB had made 15 observations concerning the bill on the new Central Bank Act, and the government had taken into full account thirteen of those, while taking "50%" account of a fourteenth observation and not taking into account a fifteenth one because Hungary is not a member of the eurozone and thus does not have to adjust to the eurozone.

The debate was about whether the number of the central bank’s rate-setters could be increased, and their number will grow by two, he said.

Mr Rogan stressed that the MNB is independent and the members of the Monetary Council are independent, as evidenced by their rate decision on Tuesday.

The Monetary Council raised the central bank’s key rate by 50bp to 7.00% at a meeting on Tuesday. The National Economy Ministry said the decision would hurt growth.