The Institutional Framework for the Supervision of the Financial Intermediary System in Hungary

Abstract

The economic crisis unfolding in 2007 had significant implications in terms of reinterpreting the role and responsibility of central banks. This paper presents a set of criteria for a “good” institutional framework and based on that it examines the reform of the Hungarian supervisory system. Political implications have integrated the powers of the Hungarian Financial Supervisory Authority within the organisation of the National Bank of Hungary (MNB); however, policy coherence has not been fully achieved. While capability is provided, the supervisory system may become overloaded, potentially affecting the capacity of MNB. The operations of the financial supervisory function are not fully independent. The resilience of regulation has been achieved; however, in some cases it may come into conflict with the principle of an independent supervisory authority. The new Hungarian financial supervisory system basically meets the criteria of a “good” institutional framework; however, in respect of several of these criteria, certain “risks” may arise.