The National Bank of Hungary (in Hungarian: Magyar Nemzeti Bank – hereinafter referred to as the “NBH”) is the authority which is responsible for banking regulation, supervision and resolution in Hungary. NBH monitors the activities of financial and capital market institutions, funds, insurance companies and institutions of the financial infrastructure (regulated market, clearing house and central depository), using the tools of prudential supervision (i.e. supervision investigating the business soundness), as well as market surveillance and consumer protection tools, and, if necessary, it takes measures. In addition to this, NBH shall:

1. uphold to maintain the stability of the financial intermediary system, to increase its resilience and to ensure its sustainable contribution economic growth;
2. define and implement monetary policy;
3. oversee payment and settlement systems, securities settlement systems;
4. develop a macro-prudential policy framework relating to the stability of the financial intermediary system as a whole;
5. carry out the settlement of disputes with a view to reaching an out-of-court settlement – by means of the Financial Arbitration Body – between consumers and money and capital market institutions, treasuries, insurance companies and financial infrastructure institutions (regulated markets, clearing houses, central securities depositories).

The Resolution Fund (in Hungarian: Szanálási Alap) has been established to support the financial stability which aim is to ensure the funding needs of the financial sector without the need of public resources. The main tasks of the Resolution Fund are to cover the costs incurred in the resolution phase of institutional crisis management, and to finance the use of resolution tools.

By implementing the Bank Recovery and Resolution Directive (BRRD) in 2014, NBH shall act as the resolution authority in Hungary, the tasks of which are defined in the Resolution Act. For further details of the resolution regime in Hungary please see question 25.

Unless otherwise provided by law, the financial services and financial auxiliary services on a commercial scale, in Hungary may only be performed subject to authorization issued under the Act CCXXXVII of 2013 on Credit Institutions and Financial Enterprises (the “Hungarian Banking Act”) by the NBH acting exclusively within its function as supervisory authority of the financial intermediary system.

These financial services cover the followings: (i) taking deposits and receiving other repayable funds from the public; (ii) credit and loan operations; (iii) financial leasing; (iv) money transmission services; (v) issuance of electronic money (including the issuance of electronic money tokens); (vi) issuance of paper-based cash-substitute payment instruments and the provision of the service related thereto, which are not recognized as money transmission services; (vii) providing guarantees as well as other forms of banker’s obligations; (viii) commercial activities in foreign currency, foreign exchange (other than currency exchange services), bills and checks on own account or as commission agents; (ix) financial intermediation services; (x) safe custody services, safety deposit box services; (xi) credit reference services; and (xii) purchasing receivables/claims.

Under the Banking Act, financial auxiliary services shall mean the pursuit of the followings: (i) currency exchange activities; (ii) operation of payment systems; (iii) money processing activities; (iv) financial brokering on the interbank market; (v) activities for the issuance of negotiable instruments; (vi) credit consultancy services.

Yes, the activity license issued by NBH depends on the sector (financial market; capital market; insurance market; funds market) and the type of the activity which shall be performed by an entity.

While a full banking license allows the financial institution to perform a broad range of activities (such as taking deposits from the public; providing credit and lending; issuing and managing payment instruments; investment services etc.), NBH issues different type of licenses for specific activities.

Another type of license is the payment institution license, which allows an entity to offer payment services such as money transfer or payment processing, while this license does not enable the entity automatically to perform other activities mentioned above.

The electronic money institution license is required to issue e-money and offer related services but does not permit the institution to perform other banking activities in general.

The Banking Act distinguishes the following within credit institutions: (i) banks; (ii) specialized credit institutions; and (iii) credit institutions set up as cooperative societies. The latter two institutions may be granted a limited activity license compared to the full banking license.

In Hungary, a banking license is granted for activities defined specifically, i.e. there is no general banking license the relevant firm will need to apply for each specific activities which are listed in the banking act.

In the current legal environment, the “regulatory sandbox” can only grant regulatory “waivers” for the implementation of innovative ideas in a rather limited scope. According to the NBH Regulation No. 47/2018 (XII.17.) on different rules for compliance with obligations under certain NBH Regulation (the “Regulation”), NBH operates the Regulatory Sandbox (in Hungarian: Innovációs Pénzügyi Tesztkörnyezet), which aims to provide financial institutions with innovative solutions for their customers, in particular to innovate and increase the efficiency of the way financial institutions use their service. If NBH determines that a financial organization meets the conditions set out in the Regulation, it shall issue a decision authorizing the financial organization to comply with its obligations under certain NBH regulations by derogating from for the maximum number of customers concerned, for the period specified in the decision. The derogation may be permitted from the following (illustrative listing): (i) data reporting obligations towards NBH; (ii) rules for handling complaints from financial entities; (iii) calculation and publication of the total cost indicator; (iv) obligations relating to prudential requirements for client and counterparty ratings and collateral valuation.

There are no specific restrictions in Hungary with respect to the issuance or custody of crypto currencies. The Hungarian legal framework is based on the Act VII of 2024 on the Crypto-Assets Market (hereinafter the “Crypto Act”), which regulates in detail the issuance of certain crypto assets and the provision of certain services related to them. Beside the Crypto Act, the Regulation (EU) 2023/1114 of the European Parliament and of the Council of 31 May 2023 on markets in crypto-assets, and amending Regulations (EU) No. 1093/2010 and (EU) No. 1095/2010 and Directives 2013/36/EU and (EU) 2019/1937 (the “MiCaR”) is also applicable in Hungary.

The Crypto Act is based on the MiCAR and sets out the obligations to apply it and details the supervision rules for crypto assets.

In the current Hungarian legal environment, there is no definitions or qualification of crypto assets other than defined or specified by the MiCAR, thus crypto assets are not covered by the investor compensation schemes or by the deposit guarantee scheme.

The Crypto Act does not define in detail the rules of service providing relating to crypto assets, the rules set out in MiCAR shall be applicable. According to a guideline issued by NBH regarding the licensing of crypto asset providers, the crypto asset provider shall to have at all times prudential collaterals in place, the amount of which must be at least the higher of: (i) a fixed minimum amount of capital, depending on the type of crypto asset service provided as detailed in Annex IV of MiCAR (the minimum amounts shall be – depending on the type of services: EUR 50,000; EUR 125,000 or EUR 150,000); (ii) one quarter of the fixed general costs for the previous year, revised annually.  In addition to this, as per detailed in Article 35 of MiCAR, issuers of asset-referenced tokens, shall, at all time have own funds equal to an amount of at least the highest of the following: (i) EUR 350,000; (ii) 2% of the average amount of the reserve of assets referred to in Article 36; (iii) a quarter of the fixed overheads of the preceding year. The reserve of assets shall be composed and managed in such a way that the risk associated to the assets referenced by the asset-referenced tokens are covered; and the liquidity risks associated to the permanent rights of redemption of the holders are addressed.

The requirements for the establishment of a financial institution and obtain a bank license is detailed in the Banking Act. The licensing procedure aimed at the foundation of a credit institution consists of two steps. First, the founders of the credit institution must submit the application for the foundation of the credit institution to the NBH. In possession of the foundation license, the application for the activity (operating) license must be submitted by the credit institution to the NBH within 6 months after the receipt of the foundation license by the founders.

Unless otherwise regulated by law, in the NBH-procedure the application deadline is three months. If the NBH called upon the client to submit missing documents, the administration deadline shall be calculated from the submission of all documents in full. In the procedure aimed at obtaining the foundation and activity license, the administration deadline may be prolonged in justified cases on one occasion by three months at the most.

Provision of cross-border services by credit institutions having its registered seat in the EEA

The rules for banking activities on a cross-border basis across the EEA are set down in the EU Directive 2013/36/EU (“Capital Requirement Directive” or “CRD”) amended by the EU Directive 2024/1619/EU (“CRD VI”).  The rules of the CRD are implemented by the Hungarian Banking Act (the provisions of the CRD VI, with a few minor exceptions, must be transposed into the Hungarian legal system by 10 January 2026, and must be applied no later than 11 January 2026).

Based on the above legislation, credit institutions incorporated (and licensed) within the EEA are authorized to also provide banking operations in Hungary (single license principle) by way of a branch (“freedom of establishment”) or under the freedom to provide services. Credit institutions may only provide services in Hungary for which they are licensed in their home Member State.

Credit institutions that are intend to provide banking services in Hungary must notify the home National Competent Authority (“NCA”) of their intention to conduct activities in Hungary. The home NCA must in turn inform the NBH as host NCA of the institution’s intention. The credit institution may commence the provision of cross-border services in Hungary from the date of informing NBH about the provision of cross-border services in Hungary.

Provision of cross-border services by credit institutions having its registered seat in a member state of the OECD

Based on the Hungarian Banking Act, a licensed financial institution having its registered seat in a member state of the Organisation for Economic Co-operation and Development (OECD) may pursue certain financial services, including lending activity, within the territory of Hungary on a cross-border basis based on its license issued by its home NCA.

A banking license may be granted to: (i) public limited companies (“nyilvánosan működő részvénytársaság”); (ii) private limited companies (“zártkörűen működő részvénytársaság”); and (ii) branches (“fióktelep”).

All three legal forms above are commonly used for operating banks.

The specific corporate governance rules of Hungarian credit institutions depend on their legal form and business activities. Generally, public and private limited companies must implement the following organizational structure: (i) board of directors, (ii) at least 2 managing directors, (iii) supervisory board, (iv) compliance department, and (v) internal control unit.

The work of the managing bodies is supported by several committees that must be established in accordance with legal provisions (These committees include, for instance, the audit committee t, or the risk management committee, nomination committee, and remuneration committee.

Requirements for remuneration policies and practice of credit institutions licensed in Hungary are set out in Section 117 to 121 of the Hungarian Banking Act (which provisions implement the CRD into Hungarian law) and in the CRR which is directly applicable in Hungary. Further, guideline no. 4/2022 (IV.8.) of the NBH on the renumeration policies establishes detailed rules on the application of legislation regarding remuneration policies by implementing Guideline no. EBA/GL/2021/04 of the European Banking Authority on sound remuneration policies.

Accordingly, credit institutions must adopt a remuneration policy that is proportionate to the financial services they provide, as well as to the nature, scale and complexity of the business model they employ. In addition, the renumeration policy and practice must align with the credit institution’s risk profile and promote effective risk management.

The renumeration policy must cover all employees of the credit institution and include all elements of remuneration, including potential retirement-related benefits and, where applicable, the framework for early retirement. The remuneration policy should also define the rules applicable to other persons acting on behalf of the credit institution (such as intermediaries).

The remuneration policy must be gender-neutral and must be aligned with the objectives of the institution’s business and risk-taking strategy, including goals related to environmental, social, and governance (ESG) risks. The NBH also expects the remuneration policy to support the credit institution in achieving and maintaining a stable capital position.

If performance-based remuneration is established, it must be based on the performance of the business units and individual employees while considering the level of risks undertaken. The remuneration policy must also take into account the different functions of business units, corporate governance (e.g., accounting, HR, IT), and internal control functions (e.g., internal audit, compliance) and, based on these differences, distinguish between the performance-based remuneration and performance evaluation of these organizational units.

Hungary, as a Member State of the EEA, has implemented the vast majority of the Basel III framework with respect to regulatory capital via CRR II and CRD V. The final elements for the implementation of Basel III have been carried out through the adoption of CRR III and CRD VI. Most of the amended provisions of CRR III became effective on 1 January 2025, while the implementation provisions of CRD VI are to be transposed by Hungary and will be applicable as of 11 January 2026.

In line with the above, no major deviations apply, however we note that

1. different initial capital requirements apply in respect of different categories of credit institutions, as follows:
   1. a bank may be established with a minimum initial capital of four billion forints,
   2. a credit institution set up as a cooperative society may be established with a minimum initial capital of three hundred million forints;
   3. a specialized credit institutions may be established with a minimum initial capital prescribed in the act applicable to that specialized credit institution;
   4. a Hungarian branch of a third-country credit institution may be established with a minimum of four billion forints in endowment capital;
2. different rules apply for global and other systemically important credit institutions in terms of capital buffers.

The requirements for the leverage ratio for the Hungarian credit institutions are determined in accordance with CRR (as amended by CRR III) and Regulation 2019/876/EU. CRR II has implemented a binding leverage ratio requirement of 3% of Tier 1 capital as principal rule, which came into effect on 28 June 2021 (note: different rules on leverage ratio applies to global and other systemically important institutions). The leverage ratio shall be calculated as the credit institution’s capital measure divided by that institution’s total exposure measure and shall be expressed as a percentage.

Credit institutions must report on their leverage ratio to the NBH and disclose certain information about it.

Hungary, as a Member State of the EEA, has implemented the Basel III liquidity requirements via CRR (as amended by CRR III), EU Regulation 2019/876/EU, and EU Regulation No. 61/2015, including LCR and NSFR.

Credit institutions must disclose information on their LCR and NSFR.

The NBH may conduct money market operations within the framework of its monetary policy toolkit to support credit institutions’ liquidity management and contribute to financial stability. The instruments of monetary policy are set out in Section 18 of Act CXXXIX of 2013 on the National Bank of Hungary. These instruments include lending and purchasing securities on the spot and derivative markets through open market operations and repurchase agreements. In addition, NBH may introduce any monetary policy instruments that it deems appropriate.

Credit institutions must publish their annual financial, as well as their consolidated financial statements on their website.

Under the CRR (as amended by CRR III), consolidated supervision of EU parent and subsidiary institutions may be possible under certain conditions. In addition to the consolidated supervision legal framework existing under CRR, the Hungarian Banking Act provides further details on the matter.

Based on Section 126 of the Hungarian Banking Act, the NBH prior approval must be obtained:

1. for the acquisition of a qualifying holding in a credit institution, or
2. for the acquisition of additional qualifying holding in a credit institution by which to reach the 20, 30 or 50 per cent limit.

In this respect qualifying holding means a direct or indirect holding in an undertaking which represents 10 % or more of the capital or of the voting rights or which makes it possible to exercise a significant influence over the management of that undertaking.

If the acquirer is a foreign entity, an acknowledgement from the competent minister might be needed pursuant to Government Decree no. 561/2022. (XII.23.).

The Hungarian regulatory regime imposes conditions on eligible owners of banks, particularly concerning major participations. These requirements are primarily set out in the Hungarian Banking Act and the CRR.

The prospective owner must:

1. be independent of any influences which may endanger the bank’s sound, diligent and reliable (collectively “prudent”) operation and have good business reputation and the capacity to provide reliable and diligent guidance and control of the bank; and
2. have transparent business connections and ownership structure so as to allow the NBH to exercise effective supervision over the bank.

Any investor (including foreign entities) acquiring or escalating up to certain ratios a qualifying holding (as detailed above) in a Hungarian bank must obtain prior approval from the NBH.

Additionally, depending on the volume of the transaction and the ownership ratio being acquired, certain foreign direct investment (FDI) regulations may also apply to foreign investors acquiring ownership in Hungarian banks in accordance with Decree No 561/2022 on the different application of certain provisions necessary for the economic protection of Hungarian companies during an emergency and/or Act LVII of 2018 on the control of foreign investment that is detrimental to Hungary’s security interests. Such FDI related provisions require that a notification must be made to the competent minister and the minister’s acknowledgement is obtained a precondition to the completion of the transaction. Pursuant to these FDI-related provisions, foreign investors must notify the competent minister and obtain the minister’s acknowledgment as a prerequisite for completing the transaction.

Hungary follows the EU framework for identifying and regulating systemically important banks, with specific rules set by the NBH.

The NBH as the financial regulator has the authority to impose a range of sanctions and enforcement measures in cases of violations of banking regulations. These sanctions are detailed in the Credit Institutions Act and other related laws such as Act CXXXIX of 2013 on the Hungarian National Bank and Act C of 2012 on the Criminal Code.

The NBH may impose:

1. administrative sanctions (e.g., official warnings, restriction/suspension of certain activities, withdrawal of license, barrel of executives from holding managerial positions in financial institutions) and fines (amount depends on the severity of the violation and fine may be imposed on financial institutions and individuals (e.g., board members, executives)); and
2. corrective measures (rectification of regulatory breaches within a given timeframe, requirement of additional capital buffer, limitation of certain banking activities).

The sanctions are imposed in proportion to the severity of the violation.

Criminal cases (such as money laundering or fraud) are referred to the relevant Hungarian authorities.

Hungary implemented the EU Bank Recovery and Resolution Directive (BRRD) by adopting Act XXXVII of 2014 (Resolution Act). The resolution process is primarily managed by the NBH acting as resolution authority.

The NBH has the following resolution tools at its disposal to achieve resolution objectives:

1. Asset sale: The failing bank’s assets, liabilities or shares are sold to another financial institution, aiming to maximize the purchase price.
2. Bridge institution: The failing bank’s assets, liabilities or shares are temporarily transferred to a state-owned institution in order to ensure the continuation of essential functions and services of the failing bank before they are eventually sold.
3. Asset separation: If justified by market conditions, the operation of the failing bank or the need to maximize revenue, the assets or liabilities of the failing bank (or the bridge institution) may be transferred to an entity owned by the Hungarian state or the Resolution Fund.
4. Bail-in: Non-capital liabilities may be written down or converted to recapitalize the institution to the extent necessary to cover losses, meet licensing requirements and restore market confidence.

The NBH may apply these resolution tools individually or in combination, except for asset separation which must be accompanied by another resolution tool.

Furthermore, the NBH requires banks to prepare recovery and resolution plans ensuring they can manage crises effectively. If a bank shows early signs of distress, the NBH can intervene with supervisory measures (e.g., restrictions on dividends, replacement of management).

The Resolution Fund, established under the BRRD to support the resolution of failing banks and financial institutions while ensuring stability in the banking sector, is financed by contributions from banks and helps cover resolution costs.

Hungary has a well-established framework to protect clients’ cash deposits and financial assets, in line with EU regulations.

Cash deposits held in Hungarian banks are protected by the National Deposit Insurance Fund (in Hungarian: “Országos Betétbiztosítási Alap” or OBA). If the event of a bank failure, OBA guarantees deposits up to the HUF equivalent of EUR 100,000 per depositor (both individual and corporate depositors) per bank. In special cases (e.g., individuals’ temporary high balances from property sales, inheritance, etc.), coverage may extend up to the HUF equivalent of EUR 150,000 for 3 months.

Investment accounts, securities, and financial instruments are protected by the Investor Protection Fund (in Hungarian: “Befektető-védelmi Alap” or BEVA). If a brokerage firm is unable return the client’s assets, BEVA compensates investors up to the HUF equivalent of EUR 100,000 per client per investment firm. For claims up to HUF 1,000,000, full compensation is provided. However, for amounts exceeding HUF 1,000,000, only 90% of the claim is covered, up to the maximum limit.

Yes, Hungary applies a bail-in tool to absorb losses and recapitalize failing banks without using taxpayer money, by imposing losses on shareholders and certain creditors in bank resolution in line with the EU Bank Recovery and Resolution Directive (BRRD).

Bail-in applies in the following order:

1. Shareholders: equity is written down first;
2. Creditors: in the order and proportion specified by Act XLIX of 1991 (Bankruptcy Act).

However, no shareholder or creditor should bear greater losses than they would have in the case of liquidation (no creditor worse off).

Certain liabilities (such as deposits protected by OBA and investments protected by BEVA, secured liabilities, employee wages and pension benefits) cannot be bailed in.

A bail-in is not automatically triggered by a liquidity shortage or a breach of LCR. Bail-in is only applied when a bank is deemed failing or likely to fail and there is no reasonable likelihood that the bank’s failure can be prevented through alternative measures.

Yes, Hungary applies requirements for banks to hold gone concern capital, commonly referred to as the Total Loss Absorbing Capacity (TLAC) under the broader framework of the Minimum Requirement for Own Funds and Eligible Liabilities (MREL). The regulatory framework aligns with the EU’s Bank Recovery and Resolution Directive (BRRD).

In general, the Hungarian regime does not differentiate between different types of banks. However, the NBH determines the MREL requirement for banks individually, considering their resolution strategies and systemic importance. Banks are required to maintain eligible liabilities that can be written down or converted into equity in case of financial distress to ensure loss absorption and recapitalization​.

There is only one exception: mortgage banks (in Hungarian: “jelzálogbank”) may be exempt from these requirements under specific conditions​.

Hungary has specific provisions concerning the liability and responsibilities of senior managers in the banking sector.

Under Hungarian law, senior managers of banks are subject to strict supervision by the NBH in relation to their fit and proper status. The appointment of the senior managers is subject to prior approval of the NBH.

Senior managers are liable if they fail to comply with the obligations set out in the Credit Institutions Act. Their liability extends to financial damages caused to the institution or its stakeholders through negligence or misconduct.

Mismanagement, fraud and failure to fulfill obligations can result in legal consequences, such as:

1. Administrative sanctions: Senior managers can face warnings, fine, or even removal from their positions as part of the supervisory actions taken by the NBH in cases of non-compliance.
2. Disqualification from management: The NBH can disqualify senior managers from holding leadership positions in banks if they fail to meet fit and proper standards or are involved in mismanagement.
3. Civil and criminal liability: Senior managers can be held liable for breaches of fiduciary duty and criminal liability could arise in cases of fraud, negligence or failure to act in the best interests of the bank.

The Resolution Act also holds senior managers accountable during crisis situations, particularly when banks face insolvency or failure. In such cases, managers may be personally liable if their actions have directly contributed to the financial distress.

In Hungary, recent trends in banking regulation are largely shaped by efforts to align with EU standards and new global financial regulations.

Hungary has made adjustments to its capital requirement framework to align with Basel III guidelines.

As part of global regulatory movements, Hungary has tightened its AML and KYC requirements. These include advanced identity verification tools, AI-driven risk assessments, and continuous transaction monitoring​.

ESG standards are becoming more stringent across Europe, and Hungary is no exception. In 2024, the NBH issued a recommendation on the minimum set of questions to be used when assessing ESG information, to clarify expectations, improve regulatory predictability, and ensure the consistent application of relevant laws.

The financial sector in Hungary is facing several potential threats, such as geopolitical and economic risks (e.g. the ongoing war in Ukraine, global energy crisis), cybersecurity threats, regulatory compliance challenges (evolving AML and ESG requirements), technological innovation (rise of fintechs and cryptocurrencies). The Hungarian financial sector’s success depends on managing these risks and adapting to regulatory changes while ensuring resilience.