Hungarian Development Bank

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Hungarian Development Bank Private Limited Company or Hungarian Development Bank in short (Magyar Fejlesztési Bank Zártkörűen Működő Részvénytársaság , Magyar Fejlesztési Bank in short) (MFB Zrt.), is a credit institution fully owned by the Hungarian State. Its legal status, tasks and scope of activities are defined in Act XX of 2001 (the MFB Act), its Memorandum of Association, and the strategy approved by the Hungarian Parliament and Government, its core tasks include the provision of funding for growth under favourable terms and conditions to Hungarian enterprises, supporting the long-term development objectives of the state, and obtaining funds from money markets for these purposes. MFB Zrt. has been receiving individual international credit ratings from Moody’s Investors Service since 19 May 2003.

History[edit]

The legal predecessor of MBFB (later called MFB) was Hungarian Investment and Development Co. (Magyar Befektetési és Fejlesztési Rt.), which was established by three state-owned institutions, Hungarian Asset Management Co. (Állami Vagyonkezelő Rt.), Hungarian Asset Management Agency (Állami Vagyonügynökség) and Hungarian Development Institute Co. (Állami Fejlesztési Intézet Rt.) on 27 November 1991 and was not a bank at the time of its establishment. It was transformed into an investment bank on 1 July 1993, from which time it was called Hungarian Investment and Development Bank Co. (Magyar Befektetési és Fejlesztési Bank Rt.). MBFB was involved in the provision of Japanese, German and EU loans in Hungary from 1995, and also acquired interest in regional development companies and subsequently in Rákóczi Bank; in the same year, MBFB took over the Bank Centre (Pénzintézeti Központ) from the Ministry of Finance and became a shareholder in Investbank.

The bank changed its name to Hungarian Development Bank in 1997 and played an active role in the consolidation and improvement of Hungarian financial institutions in the second half of the 1990s. Between 1996 and 1998, it grew into a complex banking group having among its members a broker company, specialised banks and the above-mentioned regional development companies, the separation of strategic activities serving economic policy priorities from the activities performed at the bank’s own business risk in 2000 was an important milestone in the history of the bank. In the same year, six SME funding programmes were launched and a funding product targeting family farms was introduced.

Another turning point was Act XX of 2001 on the Hungarian Development Bank, which has been the legislative framework for the operation of the Bank ever since, the strategy developed in 2002 and adopted by the Government in 2003 made a difference by positioning the bank as a classic development bank. This strategy set the main directions of operation until 2008, which were subsequently adjusted in the light of the changes in international and domestic conditions in 2007, outlining a set of objectives and a toolkit for the period until 2013. Commercial banking activities were terminated by selling Konzum Bank (2003/2004), the strategy developed in 2002 prescribed the structure and activities necessary for the performance of classic development banking activities and ensured adaptation to the principles of Hungarian economic policy. It promoted preparation for EU accession as well as compliance with the international requirements to be met by the bank, this strategy provided the basis for the organisation of a single banking group – a system with a “cleaned up” profile – around MFB in 2006. In order to clearly identify the structure and functions within the banking group, MFB and its owner, the Hungarian State, jointly decided on the improvement of the strategy and its extension to the period 2007–2013.

However, the outset of the crisis overwrote plans in 2008. Borrowing to invest practically stopped in the Hungarian financial market, and commercial banks were virtually unable to access funds. Corporate and household lending decelerated and became expensive, and then sovereign debt management reached a critical state, which was followed by a rapid and significant depreciation of the forint; in this situation, MFB’s role appreciated in the field of lending to both companies and local authorities showing a highly increased demand for short-term working capital loans as well as for long-term funding. By 2009, MFB had ultimately become a key crisis management institution.

Amid the deepening crisis, MFB’s role fundamentally changed in 2010; in parallel with the in-depth transformation of the Hungarian State, the Government entrusted MFB with two tasks: the management of public assets worth some HUF 8,000 billion and performing due diligence on its own portfolio while continuing the performance of development banking activities. After completing the due diligence process conducted from a financial, legal and IT perspective in respect of the assets entrusted to it, MFB put the companies on track towards responsible management and cleaned up its own portfolio, as a result of these efforts, MFB closed the first two quarters with a positive balance in 2013.

The structure of MFB, and the MFB Act[edit]

Act XX of 2001, as successively amended, states that MFB is a specialised credit institution operating as a private limited company having a single member, and 100% of its shares are held by the Hungarian State represented by the minister responsible for the supervision of state-owned assets, the founder has been represented by the Minister for National Development since June 2010. Besides the minister exercising the rights of the owner, the managing, decision-making and controlling organs of the Bank are the Board of Directors and the Supervisory Board, the members of the Board of Directors are appointed – for a period of five years – and may be removed by the person exercising the rights of the owner. The Board of Directors elects its own chair from among its own members, the controlling organ of the Bank is the Supervisory Board, whose chair is appointed and may be removed by the person exercising the rights of the owner. The work organisation is headed by the CEO, who is an employee of MFB Zrt, the auditor of MFB Zrt. is appointed for a definite period by the person exercising the rights of the owner. The MFB Act defines the tasks and financial service provision activities of the Bank, it also provides for conflict of interest and confidentiality. An example of the former is that the members/employees of the Board of Directors and the Supervisory Board of MFB Zrt. shall not hold office in political parties or undertake any public role in the name or interest of any political party, except for participation, as a candidate, in parliamentary or local elections.[1]

International memberships of MFB[edit]

  • European Association of Public Banks - EAPB[2]
  • European Venture Fund Investors Network - EVFIN[3]
  • Network of European Financial Institutions for SMEs - NEFI[4]
  • European Investment Fund - EIF[5]
  • European Association of Long-Term Investors - ELTI[6]
  • Banking Association for Central and Eastern Europe – BACEE[7]
  • Institute of International Finance – IIF[8]
  • International Chamber of Commerce, Hungary – ICC, Hungary[9]

International partners of MFB[edit]

  • European Investment Bank - EIB[10]
  • European Investment Fund - EIF
  • Council of Europe Development Bank - CEB[11]
  • European Commission - EC[12]

The MFB Banking Group[edit]

The MFB Act provides an itemised list of the companies that belong to the MFB Banking Group. A company may be a member of the MFB Banking Group on either of two legal bases. One group comprises those business organisations in which MFB exercises the rights of the owner on behalf of the Hungarian State, and the other comprises those in which MFB may hold ownership interest.

Analyses[edit]

MFB Periscope is a monthly economic report published by the Hungarian Development Bank. In addition to interpreting current real economic and money market trends, it focuses on the Hungarian economy and describes recent developments in its wider environment, essentially from a corporate/banking perspective.

MFB Indicator is a large-scale biannual survey in which the Bank collects information from several hundreds of Hungarian business units using a questionnaire completed on a voluntary basis. The analysis based on the survey results is built around four indices: a macroeconomic index, a market index, a financing index and an investment index, the indices recorded since summer 2009 provide a thought provoking and detailed picture of the state and processes of the Hungarian economy.

The MFB Macroeconomic Analyses provide a periodical overview of global economic processes to help the assessment of the constraints and opportunities faced by the Hungarian economy in the context of international trends.

Key balance sheet data and results (HUF million)

Description Year 2010 Year 2011 Year 2012 Year 2013
Balance sheet total 1 189 212 1 372 203 1 102 909 1 104 714
Subscribed capital 100 000 114 500 114 500 114 500
Equity 121 358 212 736 195 370 198 370
Loans provided 212 247 158 023 182 529 117 407
Proportion of qualified loans (%) 15,14% 17,76% 16,85 % 19,25 %
Impact of impairment / change in provisions on profit -32 789 -43 061 -25 138 -7 114
Operating profit 7 601 4 773 21 757 12 182
Profit before tax -25 523 -38 621 -17 135 5 379
MFB participation in total volume of corporate loans (%) 11,51% 11,49% 11,55% 9,70%

Rewards[edit]

Chairs[edit]

  • Gyula Takácsy, 1991–1994
  • Dr. Péter Medgyessy, 1994–1996
  • Éva Hegedűs, 1996–1997
  • Dr. Tamás Tétényi, 1997–1998
  • Dr. Péter Patonai, 1998–2000
  • Dr. Éva Búza, 2000–2001
  • László Baranyay, 2001–2002
  • György Zdeborsky, 2002–2010
  • László Baranyay, 2010–2013
  • Dániel Lontai, 2013–

CEOs[edit]

  • Dr. Miklós Bányai, 1991–1994
  • Dr. Péter Medgyessy, 1994–1996
  • Dr. András Huszty, 1996–1998
  • Dr. Péter Patonai, 1998–2000
  • Dr. Éva Búza, 2000–2001
  • László Baranyay, 2001–2002
  • Dr. János Erős, 2002–2010
  • László Baranyay, 2010–2013
  • Csaba Nagy, 2013–

References[edit]