Hungary passes law strengthening Hungarian Development Bank’s transparency and EU fund management

The Hungarian National Assembly has adopted Act XXIX of 2026 amending Act XX of 2001 on the Hungarian Development Bank (MFB Act) and repealing Act CXXXIV of 2025 on the provision of credit to avoid the insolvency of the Budapest Municipality. The act’s provisions support the more efficient use of EU funds and a more uniform interpretation of the rules governing the Hungarian Development Bank (MFB). The amendments tighten counterparty transparency requirements, restrict the conditions under which the Hungarian state can assume suretyship in favour of the MFB, introduce new prudent-operation and programme-disclosure obligations, ring-fence capital increases funded from Recovery and Resilience Facility funds, and strengthen the MFB’s governance and conflict-of-interest framework.

Financial settlement and currency conversion

The act amends the description of MFB’s financial settlement activity for programmes financed from separate state funds, chapter-level expenditure appropriations and EU funds to include currency conversion when the funds are disbursed. The act’s reasoning explains that such conversion is not carried out as a financial service under Act CCXXXVII on credit institutions and financial enterprises (Banking Act), so the clarification is needed for the MFB’s EU fund intermediation tasks.

Counterparty transparency

The MFB is already subject to Act LIII of 2017 on the Prevention and Combating of Money Laundering and Terrorist Financing (AML Act), but the adopted act, in the spirit of the European Commission’s recommendations and to enhance transparency, provides that MFB can only grant credit or loans, and may only assume suretyship, guarantees or other banking obligations, to or in respect of a person or organisation that:

• qualifies as a transparent organisation under the Act CXCVI of 2011 on national assets, with the exception of natural persons (including agricultural primary producers and members of primary producers’ family farms) and condominiums; and
• has identifiable beneficial owners within the meaning of the AML Act.

State suretyship for MFB

Under the act, the Hungarian State can, at the expense of the central budget and by an individual government resolution, assume suretyship as principal debtor (in Hungarian: készfizető kezesség) in favour of MFB where:

• the transaction or transactions implement a development or investment task that is justified from a national economic perspective; and
• the development or investment objective cannot be achieved by other means.

The act also provides that the government’s resolutions on such suretyship in favour of the MFB are public. The current version of MFB Act permits this suretyship to be assumed by a non-public individual government resolutions.

Risk-taking and risk-management committee

The act requires the MFB to establish a risk-taking and risk-management committee under the Banking Act.

Prudent operation and transparency obligations

Where the MFB, directly or through financial institutions, grants credit or loans to several clients, assumes suretyship or guarantees for the benefit of several clients, or invests in collective investment funds under predefined conditions (i.e. a “programme”), it must publish the following information when announcing the programme:

• its analysis of the market failure justifying the programme;
• its analysis of the programme’s incentive effect;
• its analysis of the necessity and proportionality of the programme; and
• the method and frequency of assessing the programme’s effectiveness.

Where the MFB is not required to conduct a public procurement procedure, it must select the financial intermediary or fund manager through an open, public selection process that ensures equal opportunity and equal treatment.

In addition, by 15 June each year the MFB must commission an auditor to review its processes for ensuring organisational integrity, identifying conflicts of interest, preventing double financing, ensuring legal compliance, and ensuring transparency in the remuneration of financial intermediaries and fund managers.

Capital increases funded from Recovery and Resilience Facility funds

Where a capital increase in the MFB is funded from funds provided under Regulation (EU) 2021/241 establishing the Recovery and Resilience Facility (RRF Regulation) on the basis of the recovery and resilience plan approved by a Council implementing decision, an amount corresponding to the capital increase may be used only for financing consistent with the objectives of the RRF Regulation. The government will determine by resolution what portion of the capital increase qualifies as RRF funding.

These funds may be used only on the basis of the prior opinion of the risk-taking and risk-management committee addressing the legality of use, its conformity with the RRF Regulation’s objectives, and a professional assessment. For programmes financed from these funds, the MFB must publish the client’s name and the amount of the transaction.

Governing bodies

The board of directors continues to consist of five to nine members, appointed and recalled by the minister for a five-year term and eligible for reappointment once; and the board is headed by a chair elected by the board from among its members. The chair and members of the supervisory board are also appointed and recalled by the minister and are eligible for reappointment once.

Conflict of interest and removal of officers

The act introduces stricter conflict-of-interest rules for members of the board of directors and the supervisory board (and for the leadership of MFB subsidiaries). Individuals in a political service, commissioner or government-service relationship, and individuals who carry out lobbying-type activities on a business basis aimed at influencing public-authority decision-making or asserting interests vis-à-vis public authorities, cannot hold such positions while involved in these activities and for six months after. Members of the board of directors and the supervisory board could be recalled by the minister only on the objective grounds specified in the law, and a board member’s recall would require the written proposal of the supervisory board. The MFB must also set out the management suitability and conflict-of-interest requirements in a regulation approved by the minister and apply it to the management of its subsidiaries.

Ownership rights and interest equalisation

In line with the government restructuring referred to in the act’s reasoning, the minister responsible for economic development would represent the Hungarian state as the MFB’s sole shareholder. The act also repeals the current state interest equalisation mechanism and replaces the reference to “capital and interest equalisation” with “capital equalisation”.

Repeals

The act repeals several provisions of the MFB Act, including specific MFB tasks carried out on the basis of a government resolution (e.g. microcredit refinancing and natural-disaster-related financing), the special client-group rules, and the MFB Act’s cross-reference to the Budapest Municipality credit. The act also repeals Act CXXXIV of 2025 on the provision of credit to avoid the insolvency of the Budapest Municipality. According to the act’s reasoning, this repeal is intended to settle cooperation with the Capital Municipality and create a framework for positive partnership.

Outlook

The amending act strengthens MFB’s transparency, EU fund intermediation and the governance framework. It enters into force on 19 July 2026, the fifth day after its publication in the Hungarian Official Gazette.

For more information on the amendments, contact your CMS client partner or the CMS experts who contributed to this article.

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This article was co-authored by Luca Pintér.