Hungarian National Bank

Central Bank of Hungary

The Hungarian National Bank (Magyar Nemzeti Bank, MNB) is the central bank of Hungary and as such part of the European System of Central Banks (ESCB). It was established in 1924 as a successor entity of the Austro Hungarian Bank, under the economic assistance provided to Hungary by the Economic and Financial Organization of the League of Nations. The bank calls itself the Magyar Nemzeti Bank in its English communications and occasionally clarifies that name with the expression the central bank of Hungary. The bank doesn't call itself the Hungarian National Bank in English. The Hungarian National Bank lays special emphasis on its international relations and on participation in the professional forums of international economic institutions and financial organisations (EU, IMF, OECD, BIS). Its principal aim is price stability, but it is also responsible for issuing the national currency, the Hungarian forint, controlling the money in circulation, setting the Central Bank base rate, publishing official exchange rates, and managing the foreign exchange reserves and gold to influence exchange rates.

For a short period during the Hungarian Revolution of 1848, the revolutionary government used the recently established Hungarian Commercial Bank of Pest as a central bank. The adaptation of the pre existing Austrian National Bank's to the monarchy's new political structure was only finalized in 1878, when its name was changed to Austro Hungarian Bank. The latter was given a unitary governance with a general meeting (Generalversammlung) and governing council (Generalrat) chaired by a Governor, but a dual operating structure with two separate executive teams (Direktionen) and head offices (Hauptanstalten) in Vienna and Budapest. The governor was to be jointly nominated by the respective ministers of finance of Austria and Hungary, and the bank was statutorily committed to opening new branches on an equitable basis in both parts of the Habsburg Monarchy. Hungarian nationalists were not satisfied by these arrangements and kept advocating for a separate Hungarian central bank, but their efforts remained unsuccessful until the end of the joint monarchy. The new Budapest head office building of the Austro Hungarian Bank was inaugurated in 1905. It was designed by architect Ignác Alpár, with sculpture by József Róna and Senyei Károly. After the chaotic period immediately following World War I, the Hungarian authorities established a Royal Hungarian State Note Issuing Institute (Magyar Királyi Állami Jegyintézet) on , which issued Hungarian koronas to replace the Austro Hungarian krone as the newly independent country's currency. In 1927, the National Bank introduced the Hungarian pengő to replace the korona. In 1930, the Hungarian National Bank was a founding shareholder of the Bank for International Settlements. During World War II and in its immediate aftermath, the MNB was unable to maintain the value of the pengő which experienced the world's worst ever recorded bout of hyperinflation in 1945 1946. The MNB introduced a new currency, the Hungarian forint, on The MNB was nationalized at the end of 1947. Under that system, the MNB had no independence from the Hungarian state and also engaged in commercial banking activities. A two tier banking system that focused the MNB on a monetary policy role was eventually re introduced on
Hungary was supposed to join the eurozone in 2010, which would have resulted in the MNB losing control of monetary policy, but central bank leaders criticized this plan, saying that the fiscal austerity requirements would slow growth. In December 2011 two of the three major credit rating agencies downgraded Hungarian long term currency debt to "junk status", due in part to changes to the Constitution of Hungary, creating doubts about the independence of the central bank. On 20 May 2016, Fitch Ratings upgraded Hungary's corresponding debt status to BBB− (which is investment grade), assigning a stable outlook to the rating. The upgrade was mainly motivated by, among other factors, high current account surpluses, high European Union (EU) fund inflows, banks' external deleveraging, the central bank's self financing programme and foreign currency mortgage conversion reducing Hungary's external debt and financial vulnerability.

The Governor of the Hungarian National Bank is appointed by the President of Hungary at the proposal of the Prime Minister for a six year term. The most important decision making body of the Hungarian National Bank is the Monetary Council. Its building is located in Liberty Square, in the Inner City of Budapest, next to the U. S. Embassy building. The MNB maintains a medium term inflation target of around 3%. This is somewhat higher than the generally accepted level of inflation for price stability in Europe, and it is used in order to allow for Hungary's "price catch up" to the rest of Europe. Hungary's Central Bank Act states, "The primary objective of the MNB shall be to achieve and maintain price stability. Without prejudice to its primary objective, the MNB shall support the economic policy of the Government using the monetary policy instruments at its disposal". Demonetised or damaged currency can be exchanged in the bank's head office as well as its two regional offices.