The European Central Bank has green-lit the government's proposal to change the law on the central bank which would allow the government to spread payments for recapitalising the bank from the central budget over several years in the case of the NBH posting a temporary operating loss.
According to MTI, the Hungarian central bank (NBH) has said it welcomed the ECB’s positive opinion on the amendment. Citing international examples, the NBH said it had long argued that central banks can operate effectively with a temporary negative capital balance while credibly fighting inflation. With the agreement and support of the NBH, the finance ministry initiated the amendment of sections of the Central Bank Act with regard to central bank losses with the aim of loosening the law’s strict rules, the NBH said in a statement. After looking to European best practices for handling negative capital, the bank and government sought the ECB’s opinion regarding its related proposal that should the NBH’s operating capital go into the red temporarily, the government must pay into the central budget, allowing for profits of later years to ensure capital needed in the medium term.
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