The Government has requested the Hungarian National Bank to strengthen and reorganize the recently nationalized MKB Bank, Prime Minister Viktor Orbán announced on Thursday.

At the joint press conference held together with the Governor of the National Bank, the Prime Minister pointed out that the Hungarian banking system needs to be strengthened in order to serve the interests of the Hungarian people. For this purpose, the Government has implemented a number of measures, one of which is strengthening MKB Bank. He also emphasized that there is a common will to turn the bank into one of the best financial institutions of the country.

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György Matolcsy said that the acquisition of the MKB Bank was an important step. He also announced that the National Bank – complying with the request of the Government and with the legislations – has already made those decisions, with which it can support the bank. The National Bank will guarantee the full liquidity of MKB Bank, providing the financial institution a “safety net” with its balance.

He also said that after the reorganisation of MKB they will recommend not to retain the bank in state ownership.

Concerning Széchenyi Bank – whose licence was recently withdrawn by the Hungarian National Bank – Viktor Orbán said that a fund of HUF 5.5 billion (EUR 18.3 million) will be set up to mitigate losses of the depositors. It is of great importance to the Cabinet that not only the banks, but also the Government acts in a fair way as well.

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With respect to the potential merger of MKB and Budapest Bank the Prime Minister said that the state as owner will only have the full power to act in matters related to Budapest Bank as of May or June. This means that the Government will only be in the position to hear the recommendation of the Governor of the National Bank on this issue around mid-year 2015.

Now that we have reached the over 50 per cent national ownership ratio of the Hungarian financial institutions, we can start reorganizing, restructuring and strengthening this sector – Viktor Orbán announced.

However, he also emphasized that the reason for the state to take ownership control in the financial institution system today is not in order to acquire long-term ownership, but to promote its reorganisation.

Answering a question the Prime Minister also said that the Government has reviewed the situation of the Russian economy and has recognized that the ruble crisis has an unfavourable effect on the Hungarian economy: the value of Hungarian investments in Russia decreases and – as a result of the sanctions imposed on Russia – Hungarian export opportunities are also being gravely effected.

In spite of these factors “we will not give up our plans concerning Russia”, we will only have to reschedule them, especially in the case of agriculture, Viktor Orbán said. He also added that if the sanction policy of the EU concerning Russia will be maintained, Hungarian exports to Russia may further be reduced.

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According to the Prime Minister, the vulnerability of the forint causes two problems on the level of macroeconomics: one being that of the foreign currency debtors, and the other the issue of state debt. Concerning the former one he said that the loan compensation, the conversion of foreign exchange loans and the fair banks legislation eliminate the FX-loan system risk factor.

Concerning the latter one he noted that by the end of the year the state debt will be at 76 per cent, which is still high, but shows a decreasing tendency. He also added the state debt denominated in foreign currency must be further reduced, in order to make the Hungarian economy less vulnerable.

(Prime Minister's Office)