Hungary Bankers Slam Government Savings Cooperatives Policyby
Banking group chief protests co-ops’ advantages, hvg.hu says
Co-ops, FHB, post office, Takarekbank in state-backed alliance
The Hungarian Banking Association criticized a government push to support savings cooperatives, citing an uneven playing field that has contributed to subdued lending by commercial banks, hvg.hu news website reported.
The government policy distorts competition and "endangers financial stability," banking association Chairman Mihaly Patai said in a letter to Economy Minister Mihaly Varga, hvg.hu said Wednesday. A group of savings cooperatives rejected the charges, while the Economy Ministry and the banking association declined to immediately comment on the report.
The policies criticized by Patai are part of Prime Minister Viktor Orban’s push to boost domestic ownership in the banking industry. The steps included the formation of an alliance between state-owned development bank MFB, postal service Magyar Posta, mortgage lender FHB Jelzalogbank Nyrt., a union of savings cooperatives and Takarekbank, an umbrella organization for the co-ops.
A firm "closely affiliated" with FHB has also bought a stake in Takarekbank, according to a regulatory filing during the industry’s overhaul two years ago, which led to a group with more than 3,500 service points in Hungary between them.
Patai criticized the way banking taxes are levied, in an apparent recurrence of disputes between Orban and the financial industry since his taking power in 2010. Savings cooperatives’ capital adequacy is assessed on a group level, while a levy on assets is measured individually, placing most of them unfairly into a lower tax bracket, Patai said, according to hvg.hu.
Savings cooperatives and Takarekbank rejected the bank chief’s claims, saying each unit was an individual legal entity, and was paying taxes accordingly. Changes proposed by Patai would have a negative impact on several domestic banking conglomerates, as well as co-ops, they said in an e-mailed statement.
FHB, the fifth-largest company listed in Budapest and also a member of the union of savings cooperatives, has posted losses in the past two years. Sandor Demjan, a long-time critic of the government’s policy on savings cooperatives and one of Hungary’s richest entrepreneurs, also accused FHB of using cooperatives’ funds to finance its losses in a letter addressed to Orban and seen by Bloomberg.
FHB’s shares rose 1.4 percent to 713 forint by close in Budapest, rising from a two-week low and valuing it at $168 million. The shares traded as high as 1,000 forint at the time of the Takarekbank deal in 2014.
Takarekbank said Demjan’s accusations were baseless, adding that the industry’s overhaul has helped clean up "wrongdoing" from the past, according to a statement on its website. A spokesman for FHB didn’t answer a request for comment by phone and e-mail. The central bank, which acts as financial regulator, declined to comment immediately.