On 9 February 2015, Erste Bank Hungary entered into an agreement
with the Hungarian Government and the European Bank for
Reconstruction and Development (EBRD). Pursuant to the agreement,
both the Hungarian Government and the EBRD will participate in
Erste Bank Hungary's capital increase and will each acquire a
15% of the share capital of the bank, which is part of the
Vienna-based Erste Group. With the planned increased capital, Erste
Bank Hungary has committed to increasing its lending activity in
certain sectors (public, energy, and agricultural sectors) that the
Hungarian Government views as strategically important. It is
envisaged that Erste Bank Hungary will provide credit facilities in
the aggregate amount of approximately EUR 550 million for the
above-mentioned sectors.
Furthermore, EBRD and the Hungarian Government agreed that the
Hungarian Government will gradually reduce the banking tax as of
2016 until 2019 to a level that matches the EU average and make no
additional efforts to acquire further interests in the
country's financial sector. The Hungarian Government also
undertook that it will within three years sell its existing stakes
in the Hungarian financial sector, most notably those that it has
recently acquired in Budapest Bank (formerly a member of GE Capital
Group) and MKB Bank (formerly a subsidiary of Bayerische
Landesbank).
The Hungarian Government also agreed to refrain from passing any
new law – unless required to do so by European Union
legislation – that would have a direct negative influence on
the profitability of the financial sector. Among other measures,
the Hungarian government will help – by way of adoption of
new laws – the financial sector to build down their
non-performing loan portfolios. The government also promised not to
introduce regulation on either private bankruptcy (the concept of
which is not currently present in the Hungarian legal system) or
the retroactive termination of contracts, without prior
consultation with the Hungarian Banking Association.
In turn, the EBRD undertook to participate in the settlement of the
problems caused by non-performing loans (the details of that
undertaking have not yet been revealed), to participate in share
and bond transactions enabling the Hungarian Government to divest
its stakes in the Hungarian financial sector, and to provide
facilities enhancing the lending activity of the Hungarian banks in
the corporate sector.
To sum up, the agreement between the EBRD and the Hungarian
Government seems to be a guarantee for the financial institutions
operating in Hungary that they can expect to enjoy a more secure
and financially more beneficial legal and economic environment in
the coming years.
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