The National Bank of Hungary (MNB) issued a statement on Tuesday that said it suggests modifying legislation in Hungary's new Central Bank Law regarding the bank's Monetary Council instead of removing some stipulations altogether.
The MNB suggests changing the wording of the law to state that the President of the Republic or members of Parliament could dismiss a Council member if he or she is unable to properly complete their tasks or commits a serious transgression.
The MNB does not agree with changes that would increase the number of members in the Council and elect another vice chairman, and believes that it would decrease the credibility of monetary policy. The statement says it would strengthen the long-term independence of the Council if its members would be elected and complete their terms at different times. The MNB also suggests adding a modification that would grant the chairman a right to express opinion on Council member nominees.
The MNB believes that the credibility of monetary policy can be enhanced if the bank operates in a stable institutional and legal environment. It is not beneficial that the Central Bank law has again changed the bank's legal and institutional framework, the statement said. The MNB said a previous law determined the number of Council members at 5-7 based on research conducted regarding the optimal membership of similar decision-making bodies in similarly sized countries.
The MNB also believes that a third vice chairman is unnecessary for the operation of the Council.
Mandatory limitations on the remuneration of the MNB's governor and vice-governor, also decreed by the Government, hurts the independence of the central bank and is incompatible with legal order in EU, the MNB said.
Hungary's government plans to amend at several points the Central Bank Act of late last year in order to comply with EU law, and Economy Minister György Matolcsy sent the draft amendments to European Central Bank President Mario Draghi on March 7. The government also requested the opinion of the MNB.
The amendments proposed by the government would annul the provisions of the act under which the MNB would send the agenda of the Monetary Council to the government and the meetings of the Monetary Council would be attended by a representative of the government. The paragraph regulating the dismissal of Monetary Council members in the event of severe infringement of duty would also be annulled, as would the one stipulating the elimination of the Council in the event of the country's adoption of the euro.