text: Council Decision of 29 June 1998 on the consultation of the European Central Bank by national authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42). 2 45/2016 (XI.23.) MNB rendelet a kötelező tartalékráta mértékéről, közzétéve a Magyar Közlöny 2016/180. számában. 3 All ECB Opinions are available on EUR-Lex. 4 35/2022 (IX. 15.) MNB rendelet a kötelező tartalékráta mértékéről, published in Magyar Közlöny 2022/150.

text: See paragraph 2.2 of Opinion

text: , paragraph 2.1 of Opinion

text: , paragraph 2 of Opinion

text: , paragraph 2.2 of Opinion

text: and paragraph 2.1 of Opinion

text: . 6 Credit institutions should therefore be familiar with the requirements that will apply to them once the single monetary policy is implemented in Hungary.

title: Opinion of the European Central Bank of 2 March 2023 on the reserve ratio (CON/2023/6)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 2 March 2023 on the reserve ratio (

text: ) Introduction and legal basis

text: On 2 February 2023 the European Central Bank (ECB) received a request from the Magyar Nemzeti Bank (MNB) for an opinion on a draft decree of the Governor of the Magyar Nemzeti Bank on the reserve ratio (hereinafter the ‘draft decree’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and

text: Article 2(2) of Council Decision 98/415/EC

text: , as the draft decree relates to the instruments of monetary policy of a Member State that has not adopted the euro. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Background and purpose of the draft decree

text: 1.1 In 2016 the Governor of the MNB adopted MNB Decree 45/2016 (XI.23.) on the reserve ratio , in relation to which the ECB adopted Opinion

text: . Decree 45/2016 provided that a reserve ratio of 0 % would apply to: (a) deposits and loans received with a remaining maturity of over two years at the time they are entered into the credit institution’s balance sheet; (b) debt securities issued with an agreed maturity over two years; and (c) repos. Further, a reserve ratio of 1 % would apply to all other liabilities included in a credit institution’s reserve base, subject to reserve requirements. 1.2 In 2022 the Governor of the MNB adopted MNB Decree 35/2022 (IX. 15.) on the reserve ratio , in relation to which the ECB adopted Opinion

text: . As noted in the explanatory memorandum accompanying the draft version of Decree 35/2022, the level of structural liquidity in the Hungarian banking system increased substantially over previous years. Between 2020 and 2021, in response to the COVID-19 crisis, the MNB injected HUF 11,000 billion liquidity into the market, by way of central bank refinancing operations, liquidity providing measures and asset purchase programmes. Given the maturity scheme of these instruments, the level of structural liquidity is expected to persistently remain at elevated levels. Decree 35/2022 retained the 0 % reserve ratio regarding the liabilities listed in paragraph 1.1. In order to improve the effectiveness of the monetary policy transmission mechanism and to bring market rates in line with the MNB’s guidance, Decree 35/2022

text: increased the reserve ratio for all other liabilities included in a credit institution’s reserve base from 1 % to 5 %, 6 %, 7 %, 8 %, 9 % or 10 %, depending on the declaration of the credit institution subject to reserve requirements. In the absence of a declaration, the reserve ratio is 5 %. 1.3 As noted in the explanatory memorandum accompanying the draft decree, since the entry into force of Decree 35/2022, an additional HUF 1,700 billion liquidity will be injected into the market, primarily due to foreign exchange bond issuances by the Államadósság Kezelő Központ (Debt Management Agency of Hungary) and MNB interest payments. This equals 4 to 5 % of banking system liabilities subject to reserve requirements. In order to improve the effectiveness of the monetary policy transmission mechanism, the draft decree proposes to further increase the reserve ratio to 10 %, 11 %, 12 %, 13 %, 14 % or 15 %, depending on the declaration of the credit institution subject to reserve requirements. In the absence of a declaration, the reserve ratio will be 10 %.

text: 2. Observations

text: The ECB takes note of the draft decree. As noted in earlier opinions , Member States whose currency is not the euro retain their powers in the field of monetary policy. Once the euro is introduced, Hungary’s monetary policy will be the single monetary policy and will need to be consistent with the Eurosystem’s operational framework .

text: Done at Frankfurt am Main, 2 March 2023.

text: [signed]

text: The President of the ECB

text: Christine LAGARDE


text: Zákon č. 125/2022 Z. z. z 24. marca 2022, ktorým sa mení a dopĺňa zákon č. 461/2003 Z. z. o sociálnom poistení v znení neskorších predpisov a ktorým sa menia a dopĺňajú niektoré zákony.

text: Council Decision of 29 June 1998 on the consultation of the European Central Bank by national authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42).

text: Article I, point 32, of the Law, which amends Section 142(6) of Law No 461/2003 Coll. on social insurance. The provisions on postal money orders are, in general, laid down by Law No 324/2011 Coll. on postal services and on amendments of certain laws (zákon č. 324/2011 Z.z. zo 14. septembra 2011 o poštových službách a o zmene a doplnení niektorých zákonov). A postal money order to account, which is the relevant means of payment in this case, provides for the possibility to pay without having a bank account up to an amount of EUR 15,000.

text: See paragraph 2.4 of Opinion

text: ; paragraph 2.1 of Opinion

text: ; paragraph 9.2.1 of Opinion

text: ; paragraph 2.3 of Opinion

text: ; paragraph 7.2.1 of Opinion

text: ; and paragraph 2.1 of

text: . All ECB opinions are published on EUR-Lex.

text: See paragraph 1.5 of Opinion

text: Article 127(2) of the Treaty and Article 3.1 of the Statute of the European System of Central Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’).

text: OJ L 83, 30.3.2010, p. 70.

text: and

text: , ECLI:EU:C:2021:63, paragraphs 46 to 49. ECLI:EU:C:2021:63, paragraphs 50 to 52. ECLI:EU:C:2021:63, paragraphs 55 to 56 and 67 to 70.

text: and

text: , ECLI:EU:C:2021:63, paragraph 78. 14 See paragraph 4 of Opinion

text: of the European Central Bank of 16 February 2022 on a proposal for a directive and a regulation on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing (OJ, OJ C 210, 25.5.2022, p. 15). 15 See paragraph 2.7 of Opinion

text: . 16 See paragraph 4.6 of Opinion

text: See for example Section 170 of Law No 461/2003 Coll. on social insurance. 18 See judgment of the Court of Justice of 26 January 2021, Hessischer Rundfunk,

text: and

text: , ECLI:EU:C:2021:63, paragraph 73. 19 See for example ECB Occasional Paper Series, Catch me (if you can): assessing the risk of SARS-CoV-2 transmission via euro cash, July 2021, available on the ECB website at www.ecb.europa.eu. ECLI:EU:C:2021:63, paragraph 77; and paragraph 4.9 of Opinion

publisher: Europeiska centralbanken

sprak: en

title: Opinion of the European Central Bank of 7 March 2023 on the limitation of cash payments for public social insurance contributions (CON/2023/7)

serie: con

text: OPINION OF THE EUROPEAN CENTRAL BANK of 7 March 2023 on the limitation of cash payments for public social insurance contributions (

text: ) Introduction and legal basis

type: rubrik

text: On 24 March 2022 the National Council of the Slovak Republic adopted Law No 125/2022 Coll. which amends and supplements Law No 461/2003 Coll. on social insurance (hereinafter the ‘Law’). The European Central Bank (ECB) has not been consulted by the Slovak authorities on the law. The ECB has decided to deliver an own initiative opinion on the Law. The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the second indent of

text: Article 2(1) of Council Decision 98/415/EC

text: , as the Law relates to means of payment. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

type: stycke

text: 1. Purpose of the Law

text: 1.1 The Law, among others, amends Law No 461/2003 Coll. on social insurance by abolishing the option to pay social security contributions to the Sociálna poisťovňa (Social Insurance Agency) in cash, and by allowing such payments to be made only by means of other (priced) services, i.e. by bank transfer or postal money order . The explanatory memorandum accompanying the Law when it was submitted to the National Council of the Slovak Republic explains this change as follows. Cashless payments is one of the tools to combat the shadow economy, i.e., the illegal movement of money that has not been registered in the State’s records. According to the explanatory memorandum, payments with banknotes within the legal payment system form part of the shadow economy and a proportion of the shadow economy can be cut by using cashless payment systems. The explanatory memorandum further explains that the disadvantages of cash payments include the risk of theft, the possibility of counting errors, the possible use of counterfeit

text: money, the additional costs for providing security, such as safes or armed protection, the possibility of spreading diseases and the need for personal contact. 1.2 The ECB understands that the scope of the Law’s restriction on cash payments not only covers the payment of social insurance contributions, but also other payments to the Social Insurance Agency, such as penalties and sanctions. The ECB also understands that this change is already reflected in the Social Insurance Agency’s recent practice, as it no longer accepts any cash payments at its branches.

text: 2. General observations

text: 2.1 Cash plays an important role in society. Cash is generally useful as a payment instrument because it is legal tender, widely accepted, fast and facilitates control over the payer’s spending. Moreover, it is the only payment instrument that allows citizens to settle a transaction in central bank money, which is also settled instantly, while ensuring privacy . In addition, the ability to pay in cash remains particularly important for certain groups in society that, for various legitimate reasons, prefer to use cash rather than other payment instruments, or do not have access to the banking system and electronic means of payments. These groups include not only elderly people, but also some disabled citizens, immigrants, socially vulnerable citizens, minors and others with limited or no access to digital payment services . Against this backdrop, the ECB closely monitors any national law developments that aim to limit cash payment possibilities for natural or legal persons and thereby interfere with citizens' right to pay in cash. 2.2 Under the Treaty, the European System of Central Banks has the basic task of promoting the smooth operation of payment systems , and the ECB has the exclusive right to authorise the issue of euro banknotes within the Union . The euro banknotes issued by the ECB and the national central banks of the euro area are the only banknotes with legal tender status within the euro area . 2.3 The concept of ‘legal tender’ of a means of payment denominated in a currency unit has been considered by the Court of Justice of the European Union. In particular, the Court has clarified that the concept of ‘legal tender’ signifies that this specific means of payment cannot generally be refused in settlement of a debt, denominated in the same currency unit at its full face value, with the effect of discharging the debt. In clarifying the concept of ‘legal tender’ under Union law, the Court has taken into consideration Commission Recommendation 2010/191 of 22 March 2010 on the scope and effects of legal tender of euro banknotes and coins , which provides useful guidance for the interpretation of the relevant provisions of Union law. Point 1 of Recommendation

text: 2010/191 states that, where a payment obligation exists, the legal tender of euro banknotes and coins should imply: (i) mandatory acceptance of those banknotes and coins; (ii) their acceptance at full face value; and (iii) their power to discharge from payment obligations. According to the Court, this shows that the concept of ‘legal tender’ encompasses, inter alia, an obligation in principle to accept banknotes and coins denominated in euro for payment purposes . 2.4 Insofar as it allows the Union legislature to lay down the measures necessary for the use of the euro as the single currency, the Court clarified that Article 133 of the Treaty empowers the Union legislature alone to specify the legal rules governing the status of legal tender accorded to banknotes and coins denominated in euro, insofar as that is necessary for the use of the euro as the single currency. Such exclusive competence precludes any competence on the part of the Member States in the matter, unless they have been empowered by the Union to do so or for the implementation of Union acts . 2.5 However, the Court further clarified that the status of legal tender calls only for acceptance in principle of banknotes and coins denominated in euro as a means of payment, not for absolute acceptance. The Union’s exclusive competence in matters of monetary policy is without prejudice to the competence of the Member States whose currency is the euro to regulate the procedures for settling pecuniary obligations, which do not affect the principle that, as a general rule, it must be possible to discharge a payment obligation in cash. Thus, that exclusive competence does not prevent a Member State from adopting a measure falling within one of the Member State’s competences; for instance, a Member State may, based on its competence to regulate administrative procedures, oblige the public administration to accept cash payments from citizens. Neither does it prevent a Member State, in the exercise of its own powers, from introducing, on legitimate public interest grounds, a derogation from that obligation for statutorily imposed payments, subject to compliance with certain conditions. In particular, the obligation to accept euro banknotes and coins may, in principle, be restricted by the Member States for reasons of public interest and subject to the principle of proportionality. This means that any such restrictions must be proportionate to the public interest objective pursued. When limiting the possibility, recognised by Union law, of generally discharging a payment obligation in banknotes and coins denominated in euro, Member States must ensure that any measures comply with the principle of proportionality, which requires in particular that they are appropriate for achieving the legitimate objectives pursued by the legislation at issue and do not go beyond what is necessary in order to achieve those objectives . 2.6 The Court has established that restrictions of the legal tender status of euro banknotes in particular require that the legislation: (i) does not have the object or effect of establishing legal rules governing the status of legal tender of euro banknotes; (ii) does not lead, in law or in fact,

text: to abolition of those banknotes, in particular by calling into question the possibility, as a general rule, of discharging a payment obligation in cash; (iii) has been adopted for reasons of public interest; (iv) only entails a limitation on payments in cash that is appropriate for attaining the public interest objective pursued; and (v) only entails a limitation on payments in cash that does not go beyond what is necessary in order to achieve the public interest objective . 2.7 Regarding the proportionality of a restriction of the legal tender status of euro banknotes, the Court requires not only that the measure is appropriate for attaining the public interest objective pursued, but also that it must not go beyond what is necessary in order to achieve that objective. The ECB has undertaken additional reflection in its opinions with respect to whether limitations may be considered proportionate . In particular, the ECB has noted that the broader and more general a limitation is, the stricter should be the interpretation of the requirement for the limitation to be proportionate to the objective pursued. When considering whether a limitation is proportionate, the adverse impact of the limitation in question and whether alternative measures could be adopted that would fulfil the relevant objective with a less adverse impact should always be considered .

text: 3. Specific observations

text: 3.1 The Law’s abolition of cash payments for the specific purpose of making social contributions at the Social Insurance Agency has neither the objective nor the effect of amending the legal rules governing the status of legal tender of euro banknotes or coins. The Law does not lead, in law or in fact, to the abolition of banknotes in the Slovak Republic . 3.2 The ECB understands that the Law was adopted for reasons of public interest. The explanatory memorandum provides several reasons for limiting payments of social insurance contributions in cash. The ECB considers these various reasons to fundamentally fall into three different kinds of public interest objectives: (i) combating the shadow economy; (ii) avoiding unreasonable costs for public institutions that have to accept cash payments due to the risk of theft, counting errors, the use of counterfeit money and additional costs for providing security; and (iii) mitigating the risk of spreading dangerous and contagious diseases. 3.3 The ECB is of the view that the Slovak authorities have not demonstrated that the abolition of the option to pay social contributions to the Social Insurance Agency in cash is appropriate for attaining the pursued public interest objectives, and that this limitation of cash does not go beyond what is necessary to achieve these objectives. 3.4 First, it can be questioned whether a limitation of cash payments to the Social Insurance Agency is appropriate and necessary to combat the shadow economy. In particular, it is not clear how

text: removing the possibility to make a cash payment to a public law institution, such as the Social Insurance Agency, which records such cash payment in its accounts and can share such information with other public (e.g., tax) authorities , can contribute to combating the shadow economy. 3.5 Second, while the Court has accepted that it is in the public interest that monetary debts to public authorities may be honoured in a way that does not involve those authorities in unreasonable expense which would prevent them from providing services cost-effectively , the ECB is of the view that the Slovak authorities have not sufficiently demonstrated that the Social Insurance Agency incurred unreasonable expenses in accepting cash payments that would prevent it from providing cost-effective social services. 3.6 Third, the Slovak authorities have not demonstrated with data that, during a pandemic or in a situation with epidemic potential, the abolition of the option to pay social contributions to the Social Insurance Agency in cash is appropriate and necessary to mitigate the risk of spreading a dangerous and contagious disease, where there are no or only insufficient measures mitigating the spread. In fact, the Eurosystem conducts regular research into the potential impact on public health of the production and circulation of euro banknotes, including in relation to COVID-19. Within the context of the COVID-19 pandemic, it has been shown that the risk of virus transmission via banknotes and coins is very low and that cash is safe to use . 3.7 Finally, the Law and its explanatory memorandum do not address the proportionality of the cash payments prohibition in light of existing alternative means of payment for the relevant social insurance contributions, namely bank transfers and postal orders, which are subject to additional fees for payers . 3.8 To conclude, the ECB considers that the Slovak authorities have not sufficiently assessed the proportionality of the new limitation on cash payments. As the explanatory memorandum phrases the public interest objectives only in a vague manner and as the legislator has not provided any concrete impact assessment, it is difficult for the ECB to assess whether or not the limitation of cash payments to the Social Insurance Agency could be considered proportionate in light of the public interest objectives pursued. The Slovak authorities should thus carefully consider any restrictions on cash payments, taking into account the criteria established by the Court. In particular the Slovak authorities should ensure that restrictions on cash payments are appropriate and necessary to achieve the public interests pursued and do not call into question the possibility, as a general rule, of discharging a payment obligation in legal tender.

text: This opinion will be published on EUR-Lex. Done at Frankfurt am Main,7 March 2023. [Signed]

text: The President of the ECB

text: Christine LAGARDE

type: vagledning

utgivare: ecb


text: Ustawa z dnia 7 lipca 2022 r. o finansowaniu społecznościowym dla przedsięwzięć gospodarczych i pomocy kredytobiorcom (Dziennik Ustaw z 2022 r. poz.1488).

text: See, for example, paragraph 3.1 of Opinion

text: , paragraph 3.3 of Opinion

text: , paragraph 3.2 of Opinion

text: , paragraph 3.1.1 of Opinion

text: , paragraph 3.1.1 of Opinion

text: and paragraph 3.5 of Opinion

text: . 3 Spanish Royal Decree-Law 19/2022 establishing a Code of Good Practices to alleviate the rise in interest rates on primary residence mortgage loans, amending Royal Decree-Law 6/2012 of urgent measures to protect mortgage debtors without resources, and adopting other structural measures to improve the market of mortgage loans (Real Decreto-ley 19/2022, de 22 de noviembre, por el que se establece un Código de Buenas Prácticas para aliviar la subida de los tipos de interés en préstamos hipotecarios sobre vivienda habitual, se modifica el Real Decreto-ley 6/2012, de 9 de marzo, de medidas urgentes de protección de deudores hipotecarios sin recursos, y se adoptan otras medidas estructurales para la mejora del mercado de préstamos hipotecarios, «BOE» núm. 281, de 23 Noviembre 2022).

text: Resolution of November 23 2022 of the Secretary of State for the Economy and Business Support, which publishes the Agreement of the Council of Ministers of November 22 2022, approving the Code of Good Practices for Urgent measures for mortgage debtors at risk of vulnerability (Resolución de 23 de noviembre de 2022, de la Secretaría de Estado de Economía y Apoyo a la Empresa, por la que se publica el Acuerdo del Consejo de Ministros de 22 de noviembre de 2022, por el que se aprueba el Código de Buenas Prácticas de medidas urgentes para deudores hipotecarios en riesgo de vulnerabilidad, «BOE» núm. 282, de 24 Noviembre 2022).

text: National budget Law for the year 2023 (Law of 29 December 2022, No 197) (Legge 29 dicembre 2022, n. 197, recante: «Bilancio di previsione dello Stato per l'anno finanziario 2023 e bilancio pluriennale per il triennio 2023-2025», pubblicata nel Supplemento ordinario n. 43/L alla Gazzetta Ufficiale - Serie generale - n. 303 del 29 dicembre 2022).

text: Decree-Law No. 80-A/2022 of 25 November 2022 (Decreto-Lei n.º 80-A/2022, de 25 de Novembro, que estabelece medidas destinadas a mitigar os efeitos do incremento dos indexantes de referência de contratos de crédito para aquisição ou construção de habitação própria permanente (Diário da República n.º 228/2022, 2.º Suplemento, Série I de 2022-11-25, Pág. 2 - 6)).

text: A pre-arrears action plan already existed in Portugal (see Decree-Law No. 227/2012 of 25 October (Decreto-Lei n.º 227/2012, de 25 de Outubro, que estabelece princípios e regras a observar pelas instituições de crédito na prevenção e na regularização das situações de incumprimento de contratos de crédito pelos clientes bancários e cria a rede extrajudicial de apoio a esses clientes bancários no âmbito da regularização dessas situações (Diário da República n.º 207/2012, Série I de 2012-10-25, Pág. 6025 - 6033))). However, Decree-Law No. 80-A/2022 of 25 November established triggers related to the DSTI ratio (36 % under certain conditions, or 50 %).

text: Emergency Government Ordinance No. 90 of 29 June 2022 (Ordonanţa de urgenţă a Guvernului nr. 90/2022 privind acordarea unor facilităţi pentru creditele acordate de bănci şi instituţii financiare nebancare anumitor categorii de debitori, publicată în Monitorul Oficial, Partea I nr. 646 din 29 iunie 2022).

title: Opinion of the European Central Bank of 20 March 2023 on mortgage holidays (CON/2023/8)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 20 March 2023 on mortgage holidays (

text: ) Introduction and legal basis

text: On 7 July 2022 the Polish Parliament adopted the Law on crowdfunding for business ventures and assistance to borrowers (hereinafter the ‘Law’) . The European Central Bank (ECB) has decided to deliver an own initiative opinion on the Law. The ECB’s competence to deliver an opinion is based on the last paragraph of Article 127(4) and Article 282(5) of the Treaty on the Functioning of the European Union since the Law concerns the task of the European System of Central Banks (ESCB) to contribute to the smooth conduct of policies pursued by the competent authorities relating to the stability of the financial system pursuant to Article 127(5) of the Treaty, and the ECB’s tasks concerning the prudential supervision of credit institutions pursuant to Article 127(6) of the Treaty. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the Law

text: 1.1 The Law, in addition to implementing and ensuring the application of a number of Union directives and regulations, introduced the concept of ‘mortgage holidays’ to alleviate the burden on borrowers with outstanding mortgage loans following the recent increases in interest rates by Narodowy Bank Polski. According to the explanatory memorandum accompanying the Law, an increasing number of borrowers bear mortgage loan servicing costs in excess of 50 % of their monthly household income. 1.2 The Law gives consumers with outstanding mortgage loans in Polish zloty the right to suspend their mortgage payments for a specific period of time. Loans indexed or denominated in a currency other than zloty are excluded from the mortgage holiday scheme. Under the Law, a borrower may only suspend the repayment of a loan in relation to one contract concluded for the purpose of satisfying his own housing needs. To exercise this right, borrowers must simply submit a request notice to their lender, without any discretion for the lender to grant or not to grant the suspension. The loan period is extended with the period of repayment suspension. During the suspension period, borrowers are not required to pay principal and interest installments, except for insurance charges linked to their respective contracts. 1.3 Borrowers may suspend loan repayments for: (i) two months in each of the periods from 1 August to

text: 30 September 2022 and from 1 October to 31 December 2022 and (ii) one month in each quarter in the period from 1 January to 31 December 2023.

text: 2. Scope of the opinion

text: This opinion focuses on the impact of the Law on the banking system and financial stability in the euro area. It does not cover the impact of the Law on Poland’s financial stability, its banking system or economy.

text: 3. Impact of the Law on the banking system and financial stability in the euro area

text: 3.1 The Law applies to credit institutions directly supervised by the ECB within the framework of the Single Supervisory Mechanism through their operations in Poland. The Law does not prescribe any specific eligibility criteria to limit the scope of borrowers entitled to request a mortgage holiday, other than that the loan must be denominated in zloty and satisfy the borrower’s housing needs. 3.2 Granting concessions, such as payment holidays, to borrowers facing financial difficulties can support financial stability under certain circumstances by, for example, allowing such borrowers to recover from temporary liquidity shortages, while enabling lenders to maintain client relationships and avoid selling collateral at depressed prices. 3.3 However, widespread and untargeted payment holidays give rise to financial stability concerns. On the one hand, where borrowers are facing debt sustainability problems, payment holidays may delay the recognition and resolution of non-performing debt, which increases its economic cost. On the other hand, if borrowers who are able to make payments benefit from a payment holiday, the negative financial impact will unduly reduce bank profitability and increase uncertainty. Reduced bank profitability in turn implies reduced capacity for banks to retain earnings and thus to increase bank capital needed to absorb losses and back future loan origination. This, together with increased uncertainty, ultimately limits prospective borrowers’ access to credit, including mortgage loans, and could therefore lead to adverse feedback loops between the banking sector and the real economy. In addition, large losses resulting from payment holidays may threaten banks’ solvency. 3.4 In such circumstances, uncertainties arising from the impact of the Law on credit institutions may potentially decrease the franchise value. Subsequently it may increase the difficulty to attract investors for potential equity raising or bonds’ issuances to meet capital requirements and minimum requirements for own funds and eligible liabilities. Had banks known in advance that such a change to the legislation affecting their contractual agreements with borrowers would be made, they could (and most likely would) have protected themselves by charging higher mortgage interest rates or, in the extreme, not lending at all. This means that the legislation is not only allowing mortgage borrowers a payment holiday but that they may in fact receive a financial transfer from their lenders. 3.5 The fact that the Law does not prescribe any specific eligibility criteria, other than that the loan must be denominated in zloty and satisfy the borrower’s housing needs, also raises concerns with respect to the purpose of the Law. In this respect, the ECB refers to its previous statements on this point expressed in a number of opinions on draft laws dealing with the issue of restructuring foreign

text: currency mortgage loans . In particular, the ECB has noted that the application of certain targeted eligibility criteria, such as linking the right to restructure to the borrower’s actual income position, may be more appropriate. Additionally, governments are equipped with better tools to support the economy other than the mandatory restructuring of loans within the banking system, such as directly supporting distressed borrowers or compensating banks for losses caused by a moratoria in the public interest. 3.6 In this context of increased interest rates, the ECB refers to recent legislation adopted in other Member States that also aims to help borrowers meet their obligations under loan agreements linked, primarily, to residential properties. In particular, the legislation adopted in Spain provides for a code of good practices for vulnerable debtors at risk that credit institutions can voluntarily sign up to for a duration of 24 months. Pursuant to the code of good practices, borrowers may: (i) extend the duration of their loan repayment schedule up to a maximum of seven years; and (ii) convert their variable interest rate loans into fixed interest rate loans. However, eligibility for the mortgage loan restructuring measures is subject to a number of criteria, including that: (i) the purchase price of the debtor’s primary residence does not exceed EUR 300,000; (ii) the annual income of the debtor’s family unit does not exceed approximately EUR 30,000 (or higher in certain limited circumstances); (iii) the mortgage burden multiplied by at least 1.2 in the four years prior to the entry into force of this legislation; and (iv) the mortgage payments exceed 30 % of the net income of the debtor’s family unit . 3.7 Similarly, legislation has recently been adopted in Italy that also gives borrowers the right to (i) extend the repayment schedule for a maximum period of five years (provided that the remaining duration of the loan at the time of restructuring does not exceed 25 years) and (ii) restructure their variable interest rate residential mortgage loans into fixed rate loans. This right, however, is also subject to a number of conditions, which include a maximum income threshold (EUR 35,000) and a capped loan amount (EUR 200,000).

text: 3.8 Portugal has adopted similar legislation as well. According to this legislation, credit institutions that provide residential mortgage credit are required to implement certain procedures when they detect that borrowers with mortgage loans with outstanding amounts of up to EUR 300,000 are facing financial difficulties due to the rise of interest rates. The regime will be in place until 31 December 2023. More specifically, signs of deterioration in the financial capacity of the borrower are detected when customers’ debt service-to-income (DSTI) ratio reaches 36 %, as long as certain specific conditions are fulfilled (designated as a ‘significant worsening DSTI ratio’), or when customers’ DSTI simply reaches 50 % (designated as a ‘significant DSTI ratio’). If a credit institution finds a ‘significant worsening DSTI ratio’ or a ‘significant DSTI ratio’, or is warned by the customer about facts that indicate a deterioration of the customer’s creditworthiness and the credit institution concludes that the borrower has the financial capacity to avoid default, it must propose changes to one or more elements of the credit agreement, including an extension of the repayment period, the application of a grace period for the repayment of the principal and/or payments of interest, the deferral of a part of the capital to an instalment at a future date, and/or the reduction of the interest rate applicable to the credit agreement for a defined time period. Credit institutions may not charge fees or increase the interest rate on the credit agreement because of the renegotiating of the terms of the credit agreement. Credit institutions must monitor their borrowers’ credit agreements permanently and systematically by taking, at least once a month, the necessary actions to identify any signs of payment difficulties . 3.9 Finally, similar legislation was also recently adopted in Romania. While the purpose of the legislation is not the restructuring of outstanding residential mortgage loans, it does aim to reduce borrowers’ burdens, including those resulting from residential mortgage loans. Under the legislation, borrowers may request the suspension of payments representing capital instalments, interest and commissions for up to nine months. Creditors must accept such requests if, among others, in respect of natural persons: (i) the borrower is solvent on the date of the suspension request and there are no pending foreclosure procedures; (ii) compared to the similar period of 2021, there is a minimum 25 % increase in average general monthly expenses in the last three months prior to the suspension request, as a result of the price increase in the context of the current crisis; and (iii) there are no pending debt restructuring plans agreed with the creditor in the three months prior to the legislation’s entry into force. The legislation also applies to borrowers that are legal entities, providing for a separate set of eligibility criteria. In particular, such eligibility criteria include: (i) a declaration that, compared to the similar period of 2021, in the last three months prior to the suspension request, there was a decrease of at least 25 % of the average of the monthly results; (ii) a declaration that the borrower will neither

text: distribute nor pay dividends during the suspension period and will not grant or repay credits to shareholders or associates, as the case may be (with the exception of public enterprises); (iii) the borrower is not registered with the Centrala Incidentelor de Plăţi (Payment Incidents Registry) with respect to any payment incidents related to promissory notes or checks, in the last six months prior to the date of the request; (iv) the borrower is solvent on the date of the suspension request and there are no pending foreclosure procedures; (v) its net assets’ level is not below half of the share capital’s level according to the annual financial statements submitted and registered with the tax authorities by 31 December 2021; and (vi) at the time of the request, there are no debt restructuring plans agreed with the creditor in the three months prior to the legislation’s entry into force. 3.10 The Polish authorities are therefore invited to consider targeted eligibility criteria for the application of future mortgage payments holidays to limit uncertainty and risks to financial stability. 3.11 The impact of payment holidays on banks’ profitability is further exacerbated by a scheme under which the repayment period is extended in accordance with the number of deferred instalments. Under these circumstances, the present value of the loan has decreased due to the nonremuneration of the mortgage loan for the suspended period. 3.12 Several systemically important euro area banks hold significant Polish mortgage loan exposures. Therefore, general and extended mortgage payment holidays as provided for in the Law raise financial stability concerns in the euro area.

text: This opinion will be published on EUR-Lex.

text: Done at Frankfurt am Main, 20 March 2023.

text: [signed]

text: The President of the ECB

text: Christine LAGARDE


text: Council Decision 98/415/EC of 29 June 1998

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42).

text: Comprising banks established in Lithuania, foreign banks established in Lithuania and branches of Member State banks in Lithuania, central credit unions and credit unions operating in accordance with the Laws of the Republic of Lithuania on Central Credit Union and Credit Unions (Lietuvos Respublikos centrinių kredito unijų įstatymas, Lietuvos Respublikos kredito unijų įstatymas).

text: For 2023, the reference period starts on 1 January 2018 and ends on 31 December 2021. For 2024, the reference period starts on 1 January 2019 and ends on 31 December 2022.

text: Regulation (EU) No 806/2014

text: of the European Parliament and of the Council of 15 July 2014 establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Resolution Fund and amending

text: Regulation (EU) No 1093/2010

text: See paragraph 2.2 of Opinion

text: . All ECB opinions are published on EUR-Lex.

text: See Lietuvos bankas, 2022 Financial Stability Review, p. 61.

text: See paragraph 3.2.1 of Opinion

text: , paragraph 2.1 of Opinion

text: and paragraph 3.1 of Opinion

text: . 9 See Lietuvos bankas, 2022 Financial Stability Review, pp. 59-64. 10 See paragraph 3.2.2 of Opinion

text: and paragraph 3.1 of Opinion

text: See paragraph 3.3 of Opinion

text: . 12 See paragraph 3.4 of Opinion

text: . 13 See paragraph 4.2 of Opinion

text: . 14 Article 30(1) of the Lithuanian Law on Tax Administration (Lietuvos Respublikos mokesčių administravimo įstatymas) stipulates that where performing its functions, the tax administrator must cooperate with other State and municipal institutions and agencies of the Republic of Lithuania and institutions as well as ensure the exchange of information.

text: Article 30(2)

text: stipulates that the State and municipal institutions and agencies of the Republic of Lithuania must provide comprehensive assistance to the tax administrator.

text: Article 33(1)

text: stipulates that when performing the functions assigned to it, the tax administrator may obtain from persons the data required for the performance of its obligations.

text: Article 49

text: establishes that unless the laws provide otherwise, the information and data specified in Article 33(1) of this Law as are necessary for the tax administrator to perform its functions is to be submitted not later than within ten days from the date of receipt of instructions from the relevant tax administrator or within a longer time limit set forth by the tax administrator. 15 See, e.g.,

text: Article 53 of Directive 2013/36/EU

text: of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive

text: and repealing Directives

text: and

text: (OJ L 176, 27.6.2013, p. 338); see also paragraph 2.1 of Opinion

title: Opinion of the European Central Bank of 4 April 2023 on the imposition of a temporary solidarity contribution (CON/2023/9)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 4 April 2023 on the imposition of a temporary solidarity contribution (

text: ) Introduction and legal basis

text: On 13 March 2023 the European Central Bank (ECB) received a request from the Lithuanian Ministry of Finance for an opinion on a draft law on the imposition of a temporary solidarity contribution (hereinafter the ‘draft law’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the third and sixth indents of

text: Article 2(1) of Council Decision 98/415/EC

text: , as the draft law concerns Lietuvos bankas and rules applicable to financial institutions insofar as they materially influence the stability of financial institutions and markets. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the draft law

text: 1.1 The draft law imposes an obligation on credit institutions that, on 31 December 2022, held at least EUR 400 million in deposits from clients who are residents of Lithuania to pay a temporary solidarity contribution. As noted in the explanatory memorandum accompanying the draft law, this threshold is set considering that EUR 400 million of deposits represents 1 % of the deposit market of Lithuanian residents and covers credit institutions with a more significant share of residents’ deposit portfolios. At the same time the threshold imposes an obligation to contribute on those deposit takers that have a surplus of liquid funds held with Lietuvos bankas. 1.2 The explanatory memorandum states that the rationale for the draft law is based, inter alia, on the following elements: (1) the exceptionally high levels of liquid funds in credit institutions in euro area member countries as a result of monetary and fiscal measures in recent years; (2) the strong increase in credit institutions’ interest income on loans and a large excess of liquid funds, following the increase of key interest rates by the ECB; (3) an exceptionally high liquidity, which only creates a limited incentive for credit institutions to raise deposit interest rates; and (4) the Lithuanian governmental support to companies and residents that reduced the negative impact of the pandemic,

text: the energy crisis and the military invasion of Ukraine on the credit risk exposure of companies and households. 1.3 The explanatory memorandum further points out that inflation, the rise of interest rates and the high levels of liquid assets in the credit institutions’ system may further increase the banking sector’s profits. 1.4 The draft law aims to set the temporary solidarity contribution for the period from the adoption of the draft law, planned for April 2023, until 31 December 2024, while the draft law will remain in force until 15 June 2025. 1.5 The base for the temporary solidarity contribution is calculated as the net interest income that is 50 % greater than the average net interest income in the credit institution’s consolidated financial statements in the four-year reference period . The explanatory memorandum explains that the base is set at 50 % in order to provide space for further growth of credit institutions’ loan portfolios and to avoid adverse effects on the resilience of credit institutions and on overall financial stability. Possible adverse effects on the resilience of credit institutions and overall financial stability have been taken into account when determining the four-year reference period, chosen to neutralise one-off factors. Lietuvos bankas’ stress tests show that Lithuanian credit institutions are resilient to large-scale economic shocks and able to absorb significant increases in credit losses under normal circumstances. The parameters for the calculation of the temporary solidarity contribution are said to have been calibrated in such a way as to consider the credit needs of the economy. This leaves room for interest income to increase due to the growth of loan portfolios or any other positive scenarios in the market, and the remaining net interest income would be sufficient to cover unexpected losses (e.g. in case of a deterioration in the quality of loans). 1.6 Net interest income base is the difference between interest income and interest expenditure (costs), calculated in accordance with applicable accounting standards and presented in the credit institution’s consolidated financial statements. The base is reduced by the deposit insurance premiums paid to the Deposit Insurance Fund and by contributions to the Single Resolution Fund in accordance with

text: Regulation (EU) No 806/2014

text: of the European Parliament and of the Council . 1.7 Further, to calculate the temporary solidarity contribution a 60 % rate is then applied to the base. 1.8 Credit institutions subject to the obligation must pay the advance temporary solidarity contribution on a quarterly basis. The advance temporary solidarity contribution must be paid to the State budget after the end of the quarter and by the last day of the second month of the next quarter. 1.9 The proceeds collected under the draft law will be used to finance military mobility and military transport infrastructure projects. 1.10 Lietuvos bankas must submit to Valstybine mokesciu inspekcija (State Tax Inspectorate) the information necessary for the administration of the temporary solidarity contribution.

text: 2. Monetary policy context

text: 2.1 The current surge in euro area inflation poses significant challenges to the conduct of monetary policy. Energy was the dominant component of overall inflation. However, inflation has become broad based and is projected to remain too high for too long. In view of these developments and guided by its primary objective to maintain price stability , the ECB has taken determined action to ensure a timely return of inflation to the 2 % target over the medium term. Net purchases of assets have ended, the asset purchase programmes’ portfolio is declining at a measured and predictable pace and the key ECB policy rates have been raised with the intention of dampening demand and guarding against the risk of a persistent upward shift in inflation expectations. The ECB stands ready to adjust all instruments within its mandate to ensure that inflation returns to the ECB’s medium-term target and to preserve the smooth functioning of monetary policy transmission. 2.2 As the normalisation of the ECB’s monetary policy continues, it is important to recall that monetary policy operations always have distributional implications. Naturally, they have effects on incomes and the profitability of credit institutions. From a monetary policy perspective, credit institutions play a special role for ensuring the smooth transmission of monetary policy measures to the wider economy. In this context, an adequate capital base helps credit institutions to avoid abrupt adjustments to their lending to the real economy . 2.3 Evidence shows that net interest income typically tends to expand on impact as policy rates increase. This effect is higher the larger the weight of short-term or variable interest rate loans, as is the case in Lithuania where the bulk of household and company loans are granted at variable rates . However, this effect can be offset by lower lending volumes, losses recorded in the securities portfolio and an increase in provisions resulting from a deterioration of the quality of the credit portfolio. The realisation of downside risks in the current environment may significantly reduce the repayment capacity of debtors. The net effect of monetary policy normalisation on bank profitability might therefore be less positive, or even negative, over an extended horizon. The temporary solidarity contribution targets the portion of net interest income that is 50 % greater than the average net interest income over a four-year reference period (with a 60 % rate applied to such net interest income) and thus would allow credit institutions to retain the portion (40 %) of their net interest income that is 50% greater than the average over a four-year reference period. Nonetheless, as the temporary solidarity contribution is solely levied on net interest income, rather than broader profits, it may be the case that the temporary solidarity contribution is still levied even if downside scenarios materialise with adverse developments for a credit institution. Moreover, as the temporary solidarity contribution is levied to volumes of net interest income, caution is required to ensure that it does not unduly penalise credit institutions experiencing strong growth in business or involved in mergers. More generally, caution must be taken to ensure that the temporary solidarity contribution does not impact the ability of individual credit institutions to build strong capital bases and adequately provision for increased impairments and a deterioration in credit quality. This is particularly relevant in the context of current market tensions. Damaging the ability of credit institutions to maintain adequate

text: capital bases could endanger a smooth bank-based transmission of monetary policy measures to the wider economy.

text: 3. Financial stability context

text: 3.1 Imposing a financial contribution on the banking sector could have negative economic effects by making credit institutions less resilient to economic shocks. A sound capital base of credit institutions is essential to fulfil their role of credit intermediaries within the economy. Higher costs and reduced credit supply can adversely affect real economic growth . 3.2 The higher net interest income associated with excessive liquidity is only one of the consequences of the normalisation of monetary policy and tightening of financial conditions. As noted above, increasing interest rates can also create potential losses on outstanding loan portfolios. Moreover, in the long term, the rise in inflation can have negative effects on companies’ financial situations, increasing the credit risk for credit institutions . These effects are not reflected in the temporary solidarity contribution, and it is unlikely they will fully materialise in the upcoming years when this temporary solidarity contribution is levied. These different factors should be considered to ensure that credit institutions remain well capitalised and positioned to absorb potential future losses. 3.3 In its current design, the temporary solidarity contribution could create disincentives to attract new deposit funding and provide lending to the real economy. At the same time, domestic and foreign investors could have less appetite to invest in credit institutions as the temporary solidarity contribution decreases the profitability outlook of credit institutions. In addition, the draft law could make it more difficult for credit institutions to build up extra capital buffers and increase resilience to withstand future economic shocks. Therefore, the potential negative effects of the temporary solidarity contribution on the banking sector and its impact on financial stability should be closely monitored, particularly within the current context of higher uncertainty and increased volatility in financial markets. 3.4 The draft law ensures that the solidarity contribution is temporary in nature. Additionally, the proceeds of the temporary solidarity contribution will automatically decrease once excess liquidity and the elevated interest rate income decline, whereas interest expenditure needs may go well beyond the draft law’s time horizon. In line with these considerations, the ECB has previously recommended that a clear separation is necessary between the extraordinary nature of the proceeds and the general budgetary resources of a government to avoid their use for general fiscal consolidation purposes . 3.5 The temporary solidarity contribution can lead to fragmentation in the domestic and European financial system because of the heterogeneous nature of the banking sector. This would particularly be the case where the interest income of some credit institutions is relatively high compared to other activities. It would also be useful to analyse potential behavioural effects, including liquidity aspects of credit institutions that may want to minimise the temporary solidarity contribution, inter alia, by shifting their deposit base. 3.6 Furthermore, the application of the temporary solidarity contribution only to certain Lithuanian credit

text: institutions could distort market competition and impair the level playing field both within the country and across the banking union . 3.7 In light of the above, the ECB recommends that the analysis provided in the explanatory memorandum also includes a thorough analysis of potential negative consequences for the banking sector , detailing in particular the specific impact of the temporary solidarity contribution on the longer-term profitability and capital base of banks and the provision of new lending and competition conditions in the market, to ensure that its application does not pose risks to financial stability, banking sector resilience and avoids market distortion.

text: 4. Considerations relating to the prudential supervision of credit institutions

text: 4.1 The ECB understands that the temporary solidarity contribution would, as a practical matter, apply to credit institutions, including those credit institutions directly supervised by the ECB within the framework of the Single Supervisory Mechanism. 4.2 The basis on which the temporary solidarity contribution would be established does not take into consideration the full business cycle and does not include, inter alia, operational expenses other than interest expenditure. As a result, the amount of the temporary solidarity contribution might not be commensurate with the profitability of a credit institution. Thus, as a result of the general application of the temporary solidarity contribution, credit institutions that are not necessarily benefitting from current market conditions could, if they become subject to the temporary solidarity contribution, become less able to absorb the potential downside risks of an economic downturn .

text: 5. Role of Lietuvos bankas in providing information to the Lithuanian State Tax Inspectorate

text: The ECB understands that the obligation imposed on Lietuvos bankas under the draft law to submit to the State Tax Inspectorate the information necessary for administration of the temporary solidarity contribution is not a new task of Lietuvos bankas. In accordance with the Lithuanian Law on Tax Administration , Lietuvos bankas already has the duty to provide all necessary information and data for the performance of the functions of the tax administration. The ECB understands that this duty of Lietuvos bankas is without prejudice to the obligation to maintain professional secrecy in respect of confidential prudential supervisory information under Union law .

text: This opinion will be published on EUR-Lex. Done at Frankfurt am Main, 4 April 2023. [signed]

text: The President of the ECB

text: Christine LAGARDE


title: Opinion of the European Central Bank of 26 April 2023 on the restriction of the negotiability of discount bills issued by the Magyar Nemzeti Bank and the extension of an interest rate cap (CON/2023/10)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 26 April 2023 on the restriction of the negotiability of discount bills issued by the Magyar Nemzeti Bank and the extension of an interest rate cap (

text: ) Introduction and legal basis

text: On 22 March 2023, a Hungarian Government Decree 89/2023 (III. 22.) on economic and financial measures (hereinafter the ‘decree’) was published in the Hungarian Official Gazette. The European Central Bank (ECB) has not been consulted by the Hungarian authorities on the decree. The ECB has decided to deliver an own initiative opinion on the decree. The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the third indent of

text: , as the decree relates to the Magyar Nemzeti Bank (MNB). In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the decree

text: 1.1 The decree provides that certain institutions falling under specified provisions of the Law on the Magyar Nemzeti Bank (hereinafter the ‘Law on the MNB’) may not purchase, until 30 June 2023, a Hungarian forint-denominated debt instrument issued by the central bank of a Member State of the Union. The institutions covered by this prohibition are voluntary mutual insurance funds, home savings and loan associations, private pensions and private pension funds, insurance institutions, entities regulated by the Acts on investment firms, commodity dealers, collective investment firms and their managers. The same prohibition applies to natural persons if their investment exceeds HUF 20,000,000. 1.2 The decree extends from 31 March 2023 to 30 June 2023 the existing requirement under Decree 471/2022 (XI. 21.) on certain economic measures , which stipulates that in the case of the same persons and entities covered by the decree, the interest paid on demand deposits with a maximum maturity of one year under deposit agreements concluded with a credit institution may not exceed

text: A Kormány 89/2023. (III. 22.) Korm. rendelete gazdasági, finanszírozási tárgyú intézkedésekről, közzétéve a Magyar Közlöny 2023/41. számában.

text: Council Decision 98/415/EC of 29 June 1998

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42).

text: 4 A Kormány 471/2022. (XI. 21.) Korm. rendelete egyes gazdasági tárgyú intézkedésekről, közzétéve a Magyar Közlöny 2022/190. számában. the average yield of the last auction of the discount Treasury bill issued by the Hungarian State with a remaining maturity of three months, as published on the official website of the Államadósság Kezelő Központ (Hungarian Government Debt Management Agency) (hereinafter the ‘interest rate cap’). 1.3 The decree entered into force on 23 March 2023.

text: 2. Background

text: 2.1 Following the Russian Federation’s invasion of Ukraine, pre-existing inflationary pressures were compounded by further rising energy prices, leading to consumer price inflation based on the Harmonised Index of Consumer Prices (HICP) to exceed 25 % in February 2023, which is the highest level in the Union . Against rising inflationary pressures, the MNB increased its base rate from 0.6 % in June 2021 to 13.0 % in September 2022 . In October 2022, the MNB announced one-day deposit quick tenders on a daily basis at an interest rate of 18.0 % . 2.2 In December 2021 the MNB introduced a discount bill programme, primarily, the ECB understands, for the purposes of implementing the MNB’s monetary policy . The programme was based on the applicable provisions of the Law on the MNB, which state that the MNB shall define and implement monetary policy, and that, as an instrument of its monetary policy, the MNB can issue securities . The discount bills issued by the MNB were available for purchase by (1) credit institutions having a registered office in Hungary, (2) foreign credit institutions having a registered office in the European Economic Area (EEA) and with a branch office in Hungary that act through their branch office in Hungary, and (3) Hungarian branch offices of foreign credit institutions having a registered office outside the EEA. The bills were freely negotiable . 2.3 The ECB understands that in the autumn of 2022, the Government noted that high interest rates were being earned on deposits made by certain investors pursuant to agreements with their credit institutions under which those investors deposited amounts with those credit institutions which, in turn, deposited them with the MNB. This enabled those investors to earn a higher level of interest than that earned on debt securities issued by the Government. With the intention of preventing this, the Government adopted the interest rate cap. The Minister for Economic Development announced that the interest rate cap was necessary to ensure the smooth functioning of the lending and distribution of government bonds and the channelling of resources into the economy by guaranteeing that the interest paid by the MNB on deposits will not be available to investors . 2.4 In 2021 and 2022, the discount bills issued by the MNB were issued infrequently. Following the introduction of the interest rate cap, the MNB significantly amended its discount bill programme, by announcing regular weekly tenders. The ECB understands that this facilitated credit institutions to

text: 5 See ‘HICP Overall Index’ available on the ECB Statistical Warehouse website at https://sdw.ecb.europa.eu.

text: 6 See ‘Central bank base rate history’ available on the MNB’s website at www.mnb.hu.

text: 7 See ‘Deposit Quick Tender’ available on the MNB’s website.

text: 8 See ‘Information Sheet for the issuance of the Discount bill of the Magyar Nemzeti Bank’, p.1, available on the MNB’s website.

text: 10 See ’Information Sheet for the issuance of the Discount bill of the Magyar Nemzeti Bank’, p. 3, available on the MNB’s website.

text: 11 See Minister for Economic Development, press release: ‘No more profiteering’, available at www.kormany.hu. directly purchase discount bills from the MNB and sell these bills to institutional investors to whom the interest rate cap applies. Following the amendments to the MNB discount bill programme, the amounts allotted under the programme increased significantly. . The ECB understands that the increased reliance on the discount bills programme was intended, inter alia, to address obvious impairments in the monetary policy transmission mechanism that had been created by interest rate caps on demand deposits imposed by Decree 471/2022 (XI. 21.).

text: 3. Observations

text: 3.1 Article 130 of the Treaty provides that when exercising the powers and carrying out the tasks and duties conferred upon them by the Treaties and the Statute of the European System of Central Banks and of the European Central Bank (the ‘Statute of the ESCB’), neither a national central bank (NCB), including the MNB, nor any member of its decision-making bodies, shall seek or take instructions from Union institutions, bodies, offices or agencies, from any government of a Member State or from any other body; the Union institutions, bodies, offices or agencies, and the governments of the Member States undertake to respect this principle and not to seek to influence the members of the decision-making bodies of the NCBs in the performance of their tasks . 3.2 Article 130 of the Treaty also applies to Member States with a derogation, meaning Member States in respect of which the Council has not yet decided that they fulfil the necessary conditions for the adoption of the euro, like Hungary. This provision is not referred to by Article 139(2) of the Treaty, which lists the provisions of the Treaties that do not apply to such Member States with a derogation. In contrast, Article 139(2) of the Treaty in conjunction with Article 42.2 of the Statute of the ESCB clarifies that the central banks of Member States with a derogation, including the MNB, shall retain their powers in the field of monetary policy according to national law. Consistent with these Treaty requirements, the independence of the MNB, and the concomitant primary objective of the MNB to maintain price stability, are enshrined in Hungarian law . 3.3 Central bank independence is served by providing the NCBs with the necessary means and instruments to conduct an efficient monetary policy and to achieve the price stability objective independently of any other authority, reflecting the generally held view that the primary objective of price stability is best served by a fully independent institution . 3.4 The ECB understands that the MNB’s discount bill programme is a monetary policy instrument introduced by the MNB as part of the overall definition and implementation of the MNB’s monetary policy. However, the decree, in addition to extending the interest rate cap until 30 June 2023, prohibits certain institutions from purchasing, until 30 June 2023, a Hungarian forint-denominated debt instrument issued by the central bank of a Member State. Hence, the decree, including the

text: 12 In the weekly issuances starting on 1 February 2023, the MNB allotted HUF 9,311.029 billion. On 1 February 2023 HUF 864.507 billion was allotted, on 8 February 2023 HUF 958.169 billion was allotted, on 15 February 2023 HUF 906.026 billion, on 22 February 2023 HUF 1,392.866 billion, on 1 March 2023 HUF 1,190.869 billion, on 8 March 2023 HUF 1,150.130 billion, on 14 March 2023 HUF 1,389.773 billion, on 21 March 2023 HUF 382.997 billion, and on 22 March 2023 HUF 1,075.692. See ‘Discount bill auction results’, available on the MNB’s website.

text: 13 Article 130 of the Treaty is reiterated by Article 7 of the Statute.

text: 15 See Convergence Report, June 2022, p. 20. interest rate cap, interferes with the independence of the MNB, since it impedes the MNB from independently choosing the necessary means and instruments to conduct an efficient monetary policy and to independently achieve the price stability objective. 3.5 Therefore, the decree infringes the independence of the MNB under Article 130 of the Treaty. This opinion will be published on EUR-Lex. Done at Frankfurt am Main, 26 April 2023. [signed] The President of the ECB Christine LAGARDE