Simor says central bank complied with regulations, committee disagrees

Outgoing National Bank of Hungary governor András Simor told a parliamentary committee on Monday that the central bank's operation was well planned, careful, compliant with regulations, and, from the viewpoint of taxpayer interests, economical.
    The committee adopted a resolution by a vote of 18 in favor to 4 against, declaring that the MNB violated a stipulation in the Law on Credit Institutions when it provided data to the International Monetary Fund regarding the financing situation, net foreign exchange position and fx swap transactions of Hungary's seven largest banks.
    The committee decided to hear Simor last week after the publication of a report by the State Audit Office that suggested the MNB had exceeded the scope of its authority when it provided the International Monetary Fund with data on lenders active in the country.
    Simor rejected findings in the report. He said that under Hungary's credit contract with the IMF, the MNB had no other legal option but to provide the fund with the information. The data was about banks, not about private individuals or non-financial companies, he added.
    The local units of foreign banks agreed not to reduce their exposure in Hungary in 2008, when the country signed the €20 billion IMF-led loan, and this commitment had to be checked, he said. The IMF asked for the data to ensure that money brought into the country was "not flowing out the other side", he added.
    ÁSz chairman László Domokos told the committee that the MNB's practice of managing documents was not in line with regulations between 2009 and the end of 2012. He also said that the central bank exceeded the scope of its authority and broke rules on business confidentiality when it provided the IMF with data on Hungary's seven biggest commercial lenders without a mandate.
    Domokos first made an announcement about the discrepancies in the middle of February, presenting the findings of an ÁSz report on the central bank.
    At the time, ÁSz auditing chief Mária Makkai said the MNB had provided the IMF with daily data and the European Union weekly on the seven banks' financing positions, and net forex positions during the period until August 23, 2010. It provided the IMF with weekly data on the swap transactions of the same banks in the period, Makkai said.
    In a statement published after Domokos first announced the findings of the ÁSz report, the MNB rejected ÁSz's questioning of its activities. The central bank said it did not overstep its authority by submitting data on the banks to the IMF and added that its data management system met regulatory requirements. The MNB conceded that it had provided the data on the banks without first getting their written consent, but added that the central bank governor had initiated a review of the procedural error and steps had been taken to remedy the matter.
    A criminal investigation of the MNB's data provision to the IMF has been launched, a spokeswoman for the Budapest chief prosecutor said on public television last Thursday.
    Simor told the parliamentary committee on Monday that the MNB had learnt of the investigation from the media but was never officially informed on the matter.
    Hungary's previous government said in a letter to the IMF dated November 4, 2008, that the MNB and financial market watchdog PSZÁF would provide the IMF with information, on a daily basis, on a commitment by the foreign parents of Hungarian banks to continue to support their local units.
    "Parent banks...have pledged their continuous support of their subsidiaries in Hungary, as reaffirmed in the joint statement of MNB and leading banks in Hungary of October 17, 2008. The [MNB] and [PSzÁF] will monitor this commitment closely, and provide summary information on a daily basis to IMF staff," the government said in the letter which described policies the country intended to implement in the context of its request for financial support from the IMF.
    The letter was posted on the fund's website "by agreement with the member as a service to users of the IMF website".