Are you sure?

State Audit Office finds fault with central bank wage policy

The National Bank of Hungary (NBH) operated in line with the Central Bank Act in 2010, but its remuneration and staff policies supported neither its own nor the government’s savings targets, the State Audit Office (ASZ) said on Wednesday, in a summary of its audit of the bank.

ASZ proposed in the summary that the National Economy Minister initiate a review to determine whether factors influencing the NBH’s losses in 2010 were fully regulated under the Central Bank Act. It also asked the minister to consider whether the act needed to be amended to "limit the transferability of corporate decision-making powers and to control the sphere of influence".

The NBH booked a HUF 41.6bn loss in 2010. The loss was covered entirely from the bank’s reserves, with no need for any central budget transfer, ASZ said, adding that the NBH’s accounting and settlements with the central budget were regulated and in line with regulations.

ASZ said the NBH’s payroll costs fell by HUF 654m in 2010, but the decline was the result of changes to taxes and legislation, including a cap on the salary of the central bank governor. The bank could have saved an additional HUF 146m in wage costs, it added.

ASZ said NBH’s operating costs were down HUF 945m at HUF 12.78bn in 2010, but the bank’ annual report falsely attributed the drop to improvements in efficiency.

The average wage of NBH staff was more than three times the national average, ASZ said. Staff wages increased 4.7% in 2010, a full percentage point over the average forecast increase at commercial banks, which the NBH uses as a benchmark. The wage rise was also more than the increase recommended by the National Interest Coordination Council, it added.

ASZ cited three cases in which the NBH acted in breach of the Public Procurement Act. Once, it failed to calculate the estimated value of a contract based on the law. Another time, it failed to request an explanation for an unrealistically low bid. Yet another time, it modified a service contract that was for a fixed period of time without calling a public procurement procedure.

ASZ said the NBH’s operations, management, decision-making and controlling systems were in line with the Central Bank Act.