Hungary's right-wing, populist leader Viktor Orbán has changed his financial policies and approached foreign financial institutions for the first time.
Hungary's controversial bank tax will be lowered in stages, the prime minister announced Monday.
The goal is to strengthen the Hungarian financial market and to avoid chasing foreign financial institutions out of the country.
The government “intends to create stable and dependable framework conditions.”
The declaration of intent was issued jointly by Mr. Orbán, Andreas Treichl, the head of Erste Group bank and Suma Chakrabarti, the president of the European Bank for Reconstruction and Development (EBRD).
The government emphasized it “does not intend to take over direct or indirect majority stakes in systemically important local banks.” Moreover, it will initiate no legislation that could reduce the banking sector’s profitability.
Coming into effect in early February is the law on the compulsory exchange of loans in Swiss francs.
In a related move, the Hungarian government and EBRD are seeking a stake in the Hungarian subsidiary of Austrian Erste Group. The Viennese bank will begin negotiations to turn over up to 15 percent of Erste Bank Hungary.
“This is a symbolic participation,” said a spokeswoman of Erste Group. “There is no question of a retreat from Hungary.”
The purchase price for the stake in the Hungarian subsidiary will be determined after an examination of its books. The new shareholders will name one member respectively to the management and supervisory boards.
Erste Group intends to initiate loan programs with a volume of €450 million ($508.4 million) during the next three years. “With Hungary as one of our core markets, we have great interest in the success of the Hungarian economy,” Mr. Treichl said.
Erste Group has had a presence in Hungary for many decades. But recently the Hungarian business became a millstone around its neck.
Under Mr. Orbán, Hungary has become a difficult market for foreign banks. Up to now, the goal of the prime minister and his popular-right Fidesz Party was to reduce the influence of international banks.
Mr. Orbán, who governs in the Budapest parliament with a two-thirds majority, wanted to have a greater influence on the financial market himself. Last year, he purchased German public bank Bayerische Landesbank's Hungarian subsidiary MKB.
In the past, Hungary’s bank tax has imposed a heavy burden on financial institutions. In 2010, the country of 10 million people raised the bank tax by 300 percent to a total of €1 billion.
Erste Group said its most recent payment was €50 million. Raiffeisen Bank International reportedly paid €40 million and the Unicredit subsidiary Bank Austria about €30 million.
A law on the compulsory exchange of loans in Swiss francs is coming into effect in early February. This will impose a further burden on Austrian banks in particular.
Austria-based Raiffeisen Bank is in troubled waters. On Monday, the bank published preliminary figures for 2014. After taxes, it lost €493 million.
The sharp increase in credit-risk provisions were a particular strain, as well as corrections in the value of subsidiaries in Russia, Poland and Albania totaling almost €300 million. Shareholders were left empty-handed in 2014 — no dividends were paid.
On Tuesday the bank announced that it wants to cut back its engagement in Russia and Poland in order to get back into the black. The supervisory board still has to approve the strategy.
Hans-Peter Siebenhaar is Handelsblatt's correspondent in Vienna. To contact the author: [email protected].