Hungarian Central Banker Faces Scrutiny Over Foundation Spending

  • Foundations spent on news website, Africa research, books
  • Bank says foundation decisions were lawful and independent

Hungarian central bank Governor Gyorgy Matolcsy is facing increased scrutiny and calls for his resignation over spending at the monetary authority’s network of foundations after a court decision prevented them from keeping the information secret.

Allocations by the six foundations -- set up in 2014 to promote economic research and financial literacy with $1 billion from profits booked partly on the re-valuation of foreign-currency reserves -- included the sponsorship of a news website, history books and research trips to east Africa, according to records published on their websites. Opposition parties urged Matolcsy to quit. Critics, including the European Central Bank, earlier voiced concern of potential monetary financing as the foundations take on public-service roles and invest in government bonds.

“The foundations used public funds to promote their views and to finance their business elite," Jozsef Tobias, the chairman of the Socialist Party, the biggest opposition group, was cited as saying by the MTI state news service. The funds should be transferred to the budget and spent on health care, education and social causes, he said, according to MTI.

The monetary authority has already come under criticism for its spending including on real estate, artwork and security. The central bank says it’s free to set aside profits for programs that increase public wealth.

“The foundations, once started and entered into public records, operate as autonomous legal entities that are independent of their founder and run by an advisory board," the National Bank of Hungary said by e-mail. "The central bank has no right to influence or rule on individual grant and tender decisions."

Matolcsy, an ally of Prime Minister Viktor Orban, serves as chairman of one foundation’s board of trustees and is a member of another’s, while several other National Bank of Hungary executives hold leadership positions across the network. Opposition criticism also focused on the wife of Chief Prosecutor Peter Polt being on the supervisory board of two foundations, including as chairman for one of them.

History, Tanzania

The grants include more than 500 million forint ($1.81 million) for multimedia reports awarded to New Wave Media Kft., the publisher of the Vs.hu news website. Oliver Lebhardt, the editor of Vs.hu resigned on Monday, along with at least seven reporters who said they hadn’t been aware of the foundations being a source of the site’s funding.

Other spending included 39 million forint for a six-tome publication of Hungary’s history intended to "mold the world view of youths and to strengthen their patriotic feelings in opposition to globalist views," according to the records.

Among the grants is 87 million forint for the publication and translation into Romanian, Ukrainian, Czech and Polish of an account of Matolcsy’s term as economy minister by his former chief of staff. Other items include 1.12 million forint for research into the international political impact of elections in Tanzania and 1.5 million forint for a trip to study the “challenges of the information and library sector in east Africa.”

‘Exceptionally Well’

The foundations held 74 percent of their assets of 267 billion forint in Hungarian government securities at the end of March, according to a statement by the Pallas Athene Domus Animae Foundation, published Saturday. Remaining assets were company stakes, real estate and bank deposits. "All of the foundations’ contracts were entered into in a lawful manner," it said.

The deposits include at least 6 billion forint held at NHB Novekedesi es Hitel Bank Zrt. NHB’s majority owner is Bankonzult Kft., where one of the two managing directors is a cousin of Matolcsy’s.

"The central bank has performed exceptionally well under Gyorgy Matolcsy’s leadership," said Gergely Gulyas, a deputy chairman of the ruling Fidesz party, according to the MTI state news service. It’s appropriate for the National Bank of Hungary to operate foundations, but lawmakers were wrong to try to hide their finances, he said.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE