Banking association ready to comply with new Quaestor law

Issues

The Hungarian Banking Association assured the government that its members will comply with the investor compensation legislation that was submitted to Parliament yesterday and includes a reduction in the amount that banks would have to pay to compensate victims of the collapse of Quaestor brokerage.

The bill was submitted after Hungaryʼs Constitutional Court in November nullified parts of the so-called Quaestor law, passed earlier this year. That law effectively raised the compensation threshold for investors of failed brokerage Quaestor to about €100,000 from the previous compensation threshold of €20,000 covered by the Investor Protection Fund (Beva), and left Beva members to cover the difference.

The Constitutional Court said that the manner in which the law involved Beva members in the compensation payment was unconstitutional, as were the parts of the law which outlined eligibility for the compensation which were discriminatory. 

Noting that the government conducted consultations with the Banking Association on the matter, Kovács said the banks maintain their position that they cannot be made liable for losses caused by certain dishonest institutions, which the Constitutional Court has also confirmed.

He said the Banking Association has acknowledged the governmentʼs considerations and the parties also took note of international obligations in the new draft of the compensation law.

The new bill is about the compensation of investors who suffered losses caused by bond issues where the distributor belonged to the same group as the issuer, rather than about just one brokerage. It says that Beva compensation in cases where the liquidation of financial or capital market businesses are ordered by the court will be up to HUF 30 mln (€100,000), and also limits the payment Beva members must make in a fund to cover the compensation to a combined HUF 7 billion a year.

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