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The role of the Magyar Nemzeti Bank in financial stability

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There is general global consensus today that the responsibility for system stability – in addition to the monetary regulation function – defines key objectives and tasks for central banks, regardless whether the organisation exercising money and capital market supervision rights operates within or outside of the central bank organisation. Central bank responsibility related to the stability of the financial system and its tasks are traditionally based on 3 important cornerstones:

  1. Macro-prudential analysis, system risk monitoring applied to bank and non-bank intermediaries, and occasionally intervention (e.g. lender of last resort);
  2. Regulatory policy, participation in the drafting of legislation, modernisation and improved efficiency of macro-prudential regulation and regulation unnecessarily restricting the operation of the market;
  3. Responsibility for the function, institutions, efficiency and security of payment and settlement systems and payments, and the related overseer tasks.

The Magyar Nemzeti Bank has the fundamental interest and responsibility – jointly with other government institutions – to sustain and strengthen the stability of the domestic financial system. The role of the MNB in maintaining financial stability is firstly defined by the Central Bank Act, and secondly, legislation regulating cooperation between the Magyar Nemzeti Bank, the Hungarian Financial Supervisory Authority (HFSA) and the Ministry for National Economy.

The Magyar Nemzeti Bank supports and strengthens financial stability with the resources at its disposal, and manages the shocks affecting the financial system, when necessary. As part of this activity, the MNB carries out comprehensive and regular analyses of the macroeconomic environment and the operation of financial markets, domestic financial intermediaries and the financial infrastructure. It also identifies the risks that may threaten the stability of the financial system and recognises the elements, processes contributing to the vulnerability of the financial system.

For the purpose of the efficient performance of the above tasks and the advancement of the analytical methods of financial stability, it conducts research on topics relating to financial stability and publishes the results. In the framework of the above task, it devises and further develops the models describing the behaviour of the banking sector and its interaction with the macro environment, using these to conduct stress tests.