The European Central Bank called on its counterpart in Hungary to review several of its programs ranging from education to art and real estate on concern they may violate a prohibition on monetary financing.
The activities under scrutiny include a network of foundations the Hungarian central bank created last year, the regulator’s acquisition of the Budapest Stock Exchange as well as a program aimed at diverting commercial bank deposits into government debt, the ECB said in its annual report published on its website on Thursday. It’s also looking at the bank’s purchases of artworks and cultural properties.
“As the ECB’s concerns were not dispelled in the course of 2015, the ECB will continue to closely monitor these operations with a view to ensuring that their implementation does not result in a conflict with the prohibition of monetary financing,” the Frankfurt-based regulator said.
The Hungarian central bank is “closely cooperating” with the ECB to resolve the matter as fast as possible and won’t issue further comments in the meantime, according to an e-mailed response.
The Hungarian central bank’s spending practices have been in the spotlight since it transferred about $1 billion to six foundations it set up, telling them to invest the funds in government debt and spend proceeds on financial literacy and other programs. Hungary’s ruling party tried to shield the foundations’ spending from public scrutiny but the law was struck down by the Constitutional Court last month.