ECB to continue to investigate Hungary’s central bank investment activity

The ECB will continue to investigate the investment activity of the National Bank of Hungary (NBH) and its foundations, ECB governor Mario Draghi said to a MEP question, the news portal Portfolio reported. The ECB monitoring of the NBH foundations concerned possible violations of the principle of monetary financing prohibitions and privileged state access to financial markets. Draghi reminded that central banks are not allowed to directly purchase government securities on the primary market while secondary market purchases were allowed under certain conditions. The NBH should thus ensure that its foundations’ resources are not used for state financing, either directly or indirectly, Draghi said. The ECB would consider appropriate actions, including starting an infringement procedure, in case the monitoring unveils that the NBH foundations are used to circumvent the monetary prohibition principle, he stressed.

The Portfolio reported that the NBH foundations have gradually reduced their government security holdings in the recent months, following the NBH investigation. It, however, noted that the foundations were suspected of purchasing retail securities, for which there was no secondary market so it would represent a violation of the monetary financing prohibition rule.

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