The new act on credit institutions aims to maintain the security and stability of the financial sector and it will result in balanced and client-friendly services and operation for financial institutions, Minister of State Gábor Orbán said at Hungary’s National Assembly.

In the introductory speech on new regulations, Gábor Orbán stated that provisions on credit institutions and financial enterprises will be updated, current regulatory elements will be rearranged into a more transparent structure which will make interpretation easier and the consumer protection provisions of the act on credit institutions will be strengthened.

Among these latter the Minister of State singled out that provided the bill is adopted it will become possible to extend the term of each mortgage contract free of charge. In addition, the new act on credit institutions will as of 2014 stipulate mandatory information on financial settlements prior to the termination of a mortgage contract and it clarifies the definition of a home loan contract.

The provision which stipulates that clients are allowed to swap former mortgage contracts for loan products that comply with transparent pricing requirements free of charge also increases the options of consumers.
Gábor Orbán added that the deficiencies experienced with regard to the operation of credit institutions and investment firms during the financial crisis of 2008 prompted the European Union to draft several new international regulatory elements. He emphasised that the bulk of planned changes endorse these new EU financial norms, parallel to the timing of other EU member states.

Member states are obliged until 31 December as the latest to adopt and promulgate these provisions which shall enter into force gradually as of 2014. The reason for the gradual entering into force is that credit institutions and investment firms shall comply with several new requirements on higher capital ratios. These new capital regulation elements, the so-called capital buffers, are designed to help smooth out economic cycles through supervisory agencies instead of increasing fluctuations.

Capital buffer requirements also serve to act in case an institution gains disproportionate influence on a given market and thus becomes a distortive factor, he said. The Minister of State stressed that the effects of several of these capital ratio requirements are predictable, but others will depend on processes, the amounts involved and concrete data. For the latter, he added, the National Bank of Hungary, which is capable of overseeing the entire sector, will determine requirements.

The draft version on payment service providers will be submitted to Parliament as a separate bill. Formerly, this field was regulated as part of the act on credit institutions, but the large-scale EU regulatory changes made it necessary to formulate separate regulation, Gábor Orbán said, adding that the key objective of amending the act on insurance companies and insurance activities was to combat fraud regarding insurance agent commissions. To this end, the fundament for regulation on insurance agent commissions shall be laid down and it must be brought in line with the new Civil Code.

(Ministry for National Economy)