Gov't May Ask ECB for MNB to Operate With Negative Equity

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The Hungarian government is reportedly considering asking the European Central Bank (ECB) to allow the National Bank of Hungary (MNB) to operate with negative equity after soaring interest rates look set to plunge the central bank into a record loss, according to intellinews.com.

Prime Minister Viktor Orbán's government would like to avoid recapitalizing the MNB as it struggles to close a huge budget deficit.

The government has already amended the rules for compensating the central bank's losses, allowing a five-year period to cover them.

Comments by Gergely Gulyás, head of the Prime Minister's Office, Minister of Finance Mihály Varga and MNB Deputy Governor Barnabás Virág indicate that the government and the central bank are looking for a legal solution that would allow the MNB to operate with permanently negative capital, the left-leaning daily newspaper Népszava commented.

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