The Resolution Fund is operational
29 July 2014, 5:29 pm
On the basis of Act XXXVII of 2014 on the Further Development of the Institutional System Enhancing the Security of Certain Participants of the Financial Intermediation System, which has recently entered into force, the Board of Directors of the Resolution Fund (Hungary) held its inaugural meeting. The fund is to be replenished by credit institutions and investment firms, that is, the main objective of the fund is that the situation of troubled institutions be financed by the players of the sector themselves, instead of taxpayers.
One member of the governing body of the Resolution Fund was appointed by the Minister of National Economy, two members by the Governor of the Central Bank of Hungary, and the fourth member is the current Managing Director of the National Deposit Insurance Fund.
According to the applicable law, credit institutions and investment firms authorized in Hungary are required to join the fund. As a first step, credit institutions and investment firms holding an operating license on 21 July 2014, as well as the institutions that have already applied for an operating license by 21 July 2014, must submit their declarations of accession to the Resolution Fund no later than 21 August 2014.
Thereafter, institutions shall wire-transfer, by 4 September 2014, as the first instalment of the accession fee, an amount equal to 0.01% of their registered capital and, by 20 October 2014, as the second instalment of the accession fee, 0.04% of their registered capital, to the bank account of the Resolution Fund.
Institutions applying for an operating license after 21 July 2014 shall, within 30 days of receipt of the license, pay a one-time accession fee equal to 0.05% of their registered capital.
Until the creation of the fund’s independent website, the websites of the Ministry of Finance, the Central Bank of Hungary and the National Deposit Insurance Fund will provide information on the Resolution Fund. The declaration of accession can also be downloaded from these websites.
The law, based on EU principles, entered into force on 21 July 2014. The Resolution Fund established by operation of law makes a significant contribution to the safe and sound operation of the financial intermediary system and to the enhancement of stability. It is a principle that critical functions should always be maintained in institutions having difficulties, so that resolution should be a viable alternative to insolvency proceedings. Another principle of the law is that small depositors should not suffer losses: deposits under one hundred thousand euros are still protected by the deposit insurance framework.
Templates of the declarations of accession declaration can be downloaded here.
Dated: Budapest, 29 July 2014
Ministry of Finance
Central Bank of Hungary
National Deposit Insurance Fund