MNB reveals Quaestor bond-related problems when examining groupʼs brokerage

MNB

The National Bank of Hungary (MNB) found problems at Quaestor Értékpapír, the brokerage of the now-bankrupt Quaestor group, during an unscheduled review, which prompted the visit of an oversight commissioner and the discovery of apparent irregularities related to bonds issued by Quaestor Financial Hruria, another member of the group, MTI reports.

Quaestor Financial Hruria filed for bankruptcy protection on Monday, citing bond selloffs by clients panicked by the Buda-Cash scandal. The MNB partially suspended the license of the brokerage Quaestor and sent an oversight commissioner on Tuesday. On Wednesday the Hungarian police announced that they had launched an investigation of the brokerage on suspicion of fraud.

Officials are investigating the charge that, when Quaestor issued bonds for its own company, that issue exceeded the amount of bonds it was legally allowed to sell by HUF 150 blin. 

When the groupʼs securities unit sold the Quaestor bonds, MNB in late November approved the sale of HUF 70 bln in bonds, but the investigation revealed that Quaestor Financial Hruria apparently issued HUF 210 bln in bonds, MNB spokesman István Binder told MTI.

A legal analysis is required to assess Quaestorʼs claim that the excess HUF 150 bln in papers were just "objects that looked like bonds". If the excess bonds are determined to be "real" bonds, regulated by the MNB, depositors could enjoy protection of the investment protection fund, Beva, if Quaestor Értékpapir goes under liquidation, Binder said.

The Beva guarantee applies to the clientsʼ stock of securities companies, which fall under the oversight authority of the MNB. Corporate issuers are not overseen by the MNB, the spokesman said.

The MNB suspects that the issuerʼs filing for bankruptcy were prompted by the MNB investigation at the brokerage rather than by the Buda-Cash scandal, the spokesman said.

Binder noted that there were still HUF 5.6 bln in payments due on the bonds.

The problems revealed at Hungária Értékpapír, a small brokerage company, are also related partly to bonds, Binder said. Damages there could reach HUF 5-6 bln if a private bond issue is not sufficiently covered by assets, he said, adding that a precise value has yet to be established. The MNB partially suspended the operating licence of Hungária Értékpapír because of irregularities on March 6 and put an oversight commissioner in charge of the investment company.

The MNB revoked the licences of Buda-Cash and a number of banks close to it on February 24, and the police are conducting a criminal investigation into alleged fraud in that case. The three top officials of Buda-Cash were detained on Wednesday. Damages resulting from the scandal are thought to reach HUF 100 bln. Hungaryʼs National Deposit Insurance Fund (OBA) is paying more than HUF 100 bln to clients of the banks.

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