State secretary: Treasury unable to provide full banking services to local councils

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The State Treasury is unable to provide full banking services, such as providing loans, economy ministry state secretary András Tállai said when asked to comment on the idea that local councils should keep their accounts at the State Treasury rather than at banks in future.

Tállai was speaking on commercial tv channel ATV early on Monday, answering a question concerning municipal funds frozen due to the Buda-Cash scandal.

The change was proposed by an MP of the governing alliance last week. The National Bank of Hungary has recently revoked the operating licence of brokerage Buda-Cash as well as those of members of the DRB banking group, which has close ties to Buda-Cash.

Many developments would have to be implemented for the State Treasury to perform such a task but it could not offer the advantage a commercial bank can to a municipality.

The government has been considering the issue for a long time to find an optimal solution, he said.

There are about 80 local councils affected by the Buda-Cash scandal with frozen monies totaling about HUF 3 bln, economy minister Mihaly Varga said in interview with the news channel HírTV on Friday.

The government started to pay the affected local councils support and the transfers will be completed this week, Varga said. An agreement about HUF 245m support to be paid to 67 affected councils was made at a meeting of Prime Minister Viktor Orbán and the heads of the 67 local councils last Wednesday.

Preliminary National Bank of Hungary (MNB) figures show that local councils' deposits totalled HUF 561 bln at the end of 2014. They held another HUF 15 bln in fixed-income securities, including HUF 11 bln in government securities. Their holdings in company shares, including shares in municipality-owned companies, reached HUF 816 bln.

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