It is unfair for the rest of the financial sector to pay for the losses racked up by other investment firms, Sándor Csányi, president-CEO of OTP Bank, said. Investment service providers who run a clean business have no way of influencing others who do not, so sharing the losses is “definitely unjustified,” he told commercial television channel RTL Klub. Csányi said OTP Bank, Hungary’s largest lender, would be damaged were the Investor Protection Fund (Beva) into which banks pay decides to cover the losses over fictitious bond issues at Quaestor brokerage which recently went bankrupt.
“There is still a legal issue here: whether those bonds issued illegally can be considered bonds at all and whether Beva’s insurance would apply here,” he said. Legally issued bonds are not covered by the Beva insurance as the risk is not covered. However, Quaestor sold a lot more bonds to clients than it should have legally and some of these—we don’t know how much yet—are not backed up, Csányi said. “OTP can end up paying 40% of the loss,” he said. Investment providers are centrally regulated and monitored and the sector pays a regulator’s fee and an insurance fee to Beva. The current crisis has snowballed into what it is from several years ago. “There was a loss at some point which was not dealt with at the time,” he said.
Meanwhile cabinet chief János Lázár has mentioned the Prime Minister’s Office, the foreign ministry, the agricultural ministry, as well as a number of local governments as agencies that had financial dealings with brokerage companies. János Lázár referred to a 17 billion forint (EUR 56m) loan granted by the Hungarian Development Bank under a previous, Socialist, government to now bankrupted Quaestor, as the greatest problem. Lázár insisted that the loan, granted to finance construction of a sports complex in Győr, western Hungary, was not used for that purpose. The foreign ministry invested 410 million forints (EUR 1.4m) in Hungaria Értékpapír brokerage shares, and that amount “has been lost”, János Lázár said. The ministry had also deposited 3.8 billion forints (EUR 12.7m) with Quaestor, but that total has been “recovered”, he said. Many local governments, operating under the interior ministry, have also been badly impacted by the recent brokerage scandals, the cabinet chief added.
As for the banking sector, business daily Világgazdaság has reported that over the past two years Hungarian private individuals closed over 430,000 bank accounts. In 2014 alone, the number of private bank accounts dropped by 282,000. The trend could be attributed to the duty imposed on financial transactions which triggered a rise in bank charges, according to the central bank. The transaction duty was introduced in early 2013. Citing experts, the paper said that many account holders who had more than a single account closed the ones which they used less frequently. In addition, many pensioners are supposed to have shifted from getting their pension through bank transfer to cash. As a result, the cash held by private individuals have risen by 32% over the past two years, the paper said.
via hungarymatters.hu and vilaggazdasag.hu photo: János Marjai – MTI