The ECB said April 7 in its 2015 annual report that theMagyar Nemzeti Bankshould ensure that the implementation of certain programs it launched in 2014does not conflict with monetary financing and privileged access prohibitions.

The ECB said that it has continued to monitor severalinitiatives launched by the Hungarian central bank in 2014 that are unrelatedto monetary policy and which could be perceived as being potentially inconflict with the monetary financing prohibition, to the extent that they couldbe viewed as the Hungarian central bank taking over state tasks or otherwiseconferring financial benefits on the state.

The programs include real estate investment purchases, aprogram to promote financial literacy run through a network of six foundations,the transfer to the central bank of staff formerly employed by the HungarianFSA and purchases of Hungarian artworks and cultural properties.

The ECB also noted that it was not consulted by theHungarian authorities on new legal acts related to the establishment of anextraordinary investment guarantee fund; personal insolvency measures; and theconversion of certain consumer loans denominated in foreign currency toHungarian forints.

The ECB instructed Hungary's central bank to ensure that thecentral bank resources are not "directly or indirectly" used forstate financing purposes.

Furthermore, the ECB noted that in 2015 the Magyar NemzetiBank's purchase of amajority stake in the Budapest Stock Exchange could be seen as giving rise tomonetary financing concerns.

ECB also raised concerns regarding the Magyar Nemzeti Bankchanging its monetary policy instruments to support its self-financing program,resulting in incentives for banks to purchase forint-denominated governmentsecurities, which could be seen as a means of circumventing the prohibition ofprivileged access.   

"The ECB invites the Magyar Nemzeti Bank to carefullyreview these operations with a view to avoiding any conflicts with the monetaryfinancing and privileged access prohibitions," the ECB said.