Hungary's banks face big rise in fees for brokerage troubles

Hungarian banks and investment funds will see their insurance fees more than double from next year to cover the cost of a series brokerage bailouts, the central bank's managing director, Marton Nagy, said in a newspaper interview on Saturday. Annual payments by the financial sector into deposit insurance fund OBA and investor protection fund BEVA will rise by 20 billion forints next year to 35 billion to cover the costs of these rescues, Nagy told daily newspaper Magyar Hirlap.
"This situation can prevail for six to eight years," Nagy was quoted as saying in the interview, meaning banks would have to pay the higher fees for this period.
The National Bank of Hungary suspended the licence of broking firm Quaestor on March 10, saying it had sold about 150 billion forints ($536 million) worth of bonds beyond what was permitted under its issuance programme.
It was the third Hungarian brokerage to run into trouble in weeks, in what has become one of Hungary's biggest financial scandals for decades.
Nagy said the fee increase did not yet include the potential costs of a new proposal from the country's ruling party that Quaestor's clients should be compensated by up to 100,000 euros ($106,000) each, more than the 20,000 euros they are usually due in these circumstances.
"The 20 billion forint annual additional burden could rise further if the Hungarian banking system will have to finance the difference," Nagy said.
Ruling Fidesz parliamentary group leader Antal Rogan said his new proposal, sent to parliament on Friday, would create a special compensation fund financed with payments from BEVA and a central bank loan, the size of which he did not specify.
Members of BEVA, which include Hungary's leading bank OTP , foreign banks and fund management companies, would then need to repay that loan. Lawmakers could vote on the bill as soon as next week.
The Economy Ministry and the Hungarian Banking Association will continue talks about the matter on Monday. The government has yet to decide whether to endorse the ruling party proposal.
Prime Minister Viktor Orban's cabinet is under pressure to act quickly on the scandal, which has forced the government to explain why a unit of the Foreign Ministry withdraw state funds from Quaestor days before its collapse.
Under a February agreement with Erste Bank and the European Bank for Reconstruction and Development, Hungary has also agreed to refrain from new laws or measures that may have a negative impact on bank sector profits.