The Hungarian financial system has grown into a sector offering a full range of financial services with an advanced information technology infrastructure.
The Hungarian Forint (HUF) has been fully convertible since 2001, and both the Hungarian financial market and capital market transactions are fully liberalised.
Hungary has a two-tier banking system, which means that the functions of the central bank and other specialized banks (commercial banks and specialized institutions) are separate.
The National Bank of Hungary (NBH) is the central bank and a member of the European System of Central Banks (ESCB). The NBH and the members of its decision-making bodies perform their duties and carry out their obligations independently from the government. With the exception of the European Central
Bank, the NBH (and the members of its decision-making bodies) may not ask for or follow instructions from the government, the institutions and bodies of the European Union, the governments of other EU Member States or any other institution or body.
According to the definition of Act CXII of 1996 on Credit Institutions and Financail Enterprises (Financial Enterprises Act) credit institutions are financial institutions which collect depostis and provide credit lines and loans, and perform other financial services.
A commercial bank may only operate in Hungary as company limited by shares (Rt.) or as branch office of a foreign bank. A permit from the State Supervisory Authority for Financial Institutions (PSzÁF) is required before a commercial bank may be established and the commencement of operations in HUngary is allowed. In the case of a branch office of a foreign bank, a license for banking activities issued by its foreign authority is also required. The Financial Enterprises Act determines the range of financial services that commercial banks may provide.
In Hungary, foreigners may only perform financial services in one of two ways: by establishing a company kimited by shares and registered in Hungary, or by founding a registered branch office. Banks - including the branch office of foreign credit institutions - may be founded with a minimum of HUF 2 billion (EUR 8 million) in initial capital. A foreign registered credit institution may also establish bank representation, but may not perform any kind of business activity.
Since Hungary's accession to the EU, credit institutions registered in another Member State of the EU may engage in cross-border services.
Financial institutions whose controlling interest is owned by foreign professional investors constitute more than 90 percent of the registered capital of the sector, including 27 commercial banks (see their list on the website of the Hungarian Banking Association). Only the Hungarian Development Bank and Eximbank, two banks with special governmental functions, remained in state ownership.
The Budapest Stock Exchange was (re-)opened in the summer of 1990 as the first post-communist stock exchange in the Central and East European region. The BSE has nearly 50 members currently; 40 companies are floating their securities at the primary and secondary markets and, additionally, the securities of more than 80 funds are available for investors.
The Capital Markets Act sets out rules on securities issues (including dematerialized securities), the conversion of ), the conversion of securities, and the marketing of securities (the private and public offering of securities and the public offering of government securities). From December 2007 regulations governing the service activities of investment service providers and commodities brokers, formerly contained in the Capital Markets Act, may be found in separate legislation. i.e. Act CXXXVIII of 2007 on Investment and Commodity Brokers and Their Permitted Activities.
The current number of insurance companies is 29 (see list at the Association of Hungarian Insurance Companies offering a full range of insurance products. Institutional pension funds and insurance companies are exhibiting especially rapid development.
Insurance activities are regulated by Act LX of 2003 on Insurance Companies and their Activities.