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Ministry: Széchenyi Bank majority owner to be blamed

MNB

The state of Hungary learned only after it took a 49% minority stake in the bank in June 2013 that the capital position of Széchenyi Commercial Bank was weaker than earlier thought, the National Economy Ministry said in a statement on Friday evening, adding that the Hungarian government made efforts to make the majority owner mend the situation in vain.

The ministry’s statement came following the announcement of the regulator National Bank of Hungary (MNB) that it withdrew the license from Széchenyi Commercial Bank and ordered the bank to wind up its operations, which it could no longer maintain. As part of the procedure the bank's investment banking license was also withdrawn.

According to the ministry, the Hungarian state drew the attention of the majority owner to several irregularities and urged it to remedy these. It asked that the majority owner use all means necessary to reinstate the efficient and lawful operation of the bank in order to keep its financial position stable.

The risks of the bank's problematic loan portfolio and the specifics of its operations reached such a level that they could not be handled by regulatory measures, and keeping the bank going would have compromised the interests of its clients and its ability to meet its obligations, the MNB said.

Saving the bank was not a legal option, the MNB said, noting that the bank — with a 0.14% market share based on total assets — is of a scale that presents no risk to the Hungarian financial system, according to Hungarian news agency MTI.

Széchenyi Bank is majority owned by T&T Ingatlanforgalmazó és Vagyonkezelő, a company tied to István Töröcskei, the head of the Government Debt Management Agency (ÁKK). It was earlier reported that the State of Hungary acquired its 49% stake in the bank through a HUF 3 bln capital raise last year.

The bank's 1,600 depositors will be compensated up to €100,000 (about HUF 30 mln) each within 20 days by the National Deposit Insurance Fund (OBA). Széchenyi Bank closed 2013 with net losses of HUF 2 bln. Shareholders' equity stood at HUF 4 bln and total assets at close to HUF 52 bln at the end of 2013.

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