At the beginning of the 19th century Hungary was ruled by the House of Hapsburg. Central banking functions in the Empire were first carried out by the Austrian National Bank which was founded on July 1, 1816 and later by the Austro-Hungarian Bank founded on September 30, 1878, which operated on a parity basis. During the revolution and war of independence of 1848-49 the first independent Hungarian government commissioned the Hungarian Commercial Bank of Pest as the central bank. As a result of the First World War, the Austro-Hungarian Empire crumbled and the Austro-Hungarian Bank was dissolved. The functions and responsibilities of a central bank were assumed by the Royal Hungarian State Bank, which was established on July 11, 1921.
The first independent Hungarian central bank, the National Bank of Hungary, commenced operations on June 24, 1924, in the form of a company limited by shares. The Bank's first President was Sándor Popovics. The Bank was able to stabilise the crown, which had suffered from inflation since the First World War, and then moved on to issue a new currency, the pengo. The Bank also began maintaining the state's accounts and managing its debts. Through its interest rate and credit policies, its bill discounting principles and practices, it controlled the flow of credit in the country and influenced the operation of the banking system. Management of foreign exchange matters was also placed under the Bank's control. It has been a shareholder and active member of the Bank for International Settlements since the founding of this institution in 1930.
The financial crisis caused by the world-wide economic depression in 1929 reached Hungary in July of 1931. From this time on, until the beginning of the 1990's, the National Bank of Hungary has been the authority responsible for foreign exchange deposits, has attended to official duties in this area and has operated as a central bank with responsibilities and powers in the field of economic policy. During the Second World War the national currency, the pengo, fell prey to inflation despite the efforts of the National Bank and following the war, the pengo's loss in value produced the largest depreciation in history.
With the co-operation of the National Bank of Hungary the new national currency, the forint, was introduced on August 1, 1946. Following the nationalisation of the Hungarian-held stocks of the large banks and the central bank at the end of 1947, the banking system was rapidly restructured: commercial banks and saving banks were liquidated and the banking system was reduced to a single-tier system. Starting from the second half of 1948, the National Bank of Hungary also conducted commercial banking activities, in addition to its responsibilities as the central bank. As a nationalised central bank, its management was a responsibility of the government.
On January 1, 1987 Hungary returned to the two-tier banking system. With a few exceptions most of the system, branch offices and clients of the new commercial banks which were established were drawn from the National Bank of Hungary. The Act on the National Bank of Hungary, passed in October of 1991 and amended several times since then, reinstated the independence of the Bank and re-established its range of duties.
Pursuant to Act LVIII of 2001 on the Magyar Nemzeti Bank, the Government decides on the choice of exchange rate regime in agreement with the MNB. With effect from 26 February 2008, the forint exchange rate has been floating freely vis-a-vis the euro as a reference currency, with movements in the forint determined by the interaction between the forces of supply and demand.