European Central Bank still concerned about independence of MNB

The Governing Council of the European Central Bank (ECB) has expressed concern about a revised draft of Hungary’s central bank law as well as planned constintutional amendments allowing for the merger of the central bank and the financial supervisory authority in an opinion adopted on Thursday, the ECB reported on its website.

The press statement recalled that the Governing Council had already adopted on December 14 an opinion on draft legislation regarding the National Bank of Hungary (MNB).

The EBC said that on December 21, its Governing Council received a new request, dated December 13, 2011, from the Hungarian Ministry for the National Economy for an opinion on a revised draft law, which was submitted to the Parliament on December 16, 2011 and contained substantive amendments in comparison with the version of the draft law on which the ECB had issued the previous opinion.

The press release said that the ECB also took note of a new draft constitutional law, which would authorise the legislator to merge the MNB with the Financial Supervisory Authority (PSZAF) and create a new institution. It added that this draft has not been submitted to the ECB for consultation.

In an opinion adopted on December 22, the Governing Council of the ECB expressed its concern about, inter alia:

"Provisions in the draft law on the MNB that could undermine the central bank’s independence. In particular, against the backdrop of constant changes in the composition of the MNB’s decision-making bodies, the increase in the number of members of the Monetary Council, together with the possibility of increasing the number of deputy governors - without due consideration of the MNB’s needs - gives rise to concern as to whether this could be used to influence the decision-making process, to the detriment of central bank independence.

Provisions in the new draft constitutional law that affect the personal independence of the central bank’s governor.  In particular, by appointing a new President with authority over the Governor of the MNB, who would become the Vice-President of the new institution, the personal independence of the MNB’s Governor would be impaired and Article 14.2 of the Statute of the European System of Central Banks concerning the possible reasons for dismissing the Governor of a national central bank would be breached."

The press release said that the ECB Governing Council of the ECB has requested the Hungarian authorities to bring their consultation practice into line with the requirements of European Union law and to respect the obligation to consult the ECB. It also noted that three major revisions of the central bank law in 18 months are incompatible with the principle of legal certainty.