2020.02.27. 09:44
The laws governing public debt management in Hungary
Introduction
The legal framework for government debt management involves several laws. The most important of these are the Act on the Economic Stability of Hungary (Act. No. CXCIV of 2011, hereinafter: Stability Act) , the Act on the Public Finances (Act CXCV of 2011, hereinafter: Public Finances Act) , Act on the Annual Central Budget of Hungary of the relevant year , and the Act on Capital Market (Act CXX of 2001). These laws –inter alia - provide the definition of debt, the rules for the creation and financing of debt and the scope of government agencies and organisations authorised and obliged to perform government debt management.
As the first step in the reform of public finances, the organisational framework of government debt management was renewed: from March 1, 2001, government debt management has been performed by an independent corporation, the Government Debt Management Agency Limited (ÁKK).
ÁKK is a single shareholder company registered by the Court of Registration. The company is solely owned by the Hungarian state, the ownership rights are exercised by the minister responsible for public finances (hereinafter: the Minister). The operation of ÁKK – unless otherwise provided by the Stability Act - is governed by the Act on Civil Code of Hungary (Act No. V of 2013). The company is controlled by the Board of Directors. Operations are supervised by the Supervisory Board and the company's auditor. In addition to these, internal management and control mechanisms, the process of debt management is regularly audited by the State Audit Office. Activities of the ÁKK are closely interrelated with operations of the Hungarian State Treasury. Operations of these organisations are professionally coordinated and controlled by the Minister.
Role of the minister responsible for public finances
According to the paragraph (2) of Section 5 of the Public Finances Act the Minister responsible for public finances ensures financing the deficit of the central budget. Through ÁKK, the Minister responsible for fulfilment of financing requirements specified in section 11-14 by the Stability Act .
As the subject of government debt management related civil law legal relationships, the state shall be represented by the minister responsible for public finances, who may exercise such incumbency right through ÁKK, or in writing may delegate such incumbency right to ÁKK pursuant to paragraph (2) of Section 14 of the Stability Act.
Role and duties of ÁKK
According to the paragraph (1) of Section 13 of the Stability Act, the Minister - through ÁKK -:
§ organizes the issuance of government securities, borrowing of loans and debt assumptions which shall be settled as debt of the central subsystem of public finances [...];
§ elaborates the annual and medium-term financing plan of the central government, develops the government debt financing strategy;
§ ensures the payment obligations burdening the central government debt;
§ ensures the solvency of the so-called state budget on the basis of the Act on the Annual Central Budget of Hungary and by taking into account the forecast rendered in point b) of paragraph (1) of Section 76 of Public Finances Act;
§ organises the secondary market of government securities;
§ executes dealing on own account on the secondary market of government securities, concludes security lending, repo and reverse repo transactions, concludes prompt, forward, hedge, swap and derivative transactions, and executes custodial and deposit management tasks;
§ analyses the tendencies of the government debt service and the government securities market;
§ participates in estimating the government debt, provides information on government debt of the central subsystem of public finances […] and on the tendencies in the government securities market;
§ expresses opinions on the terms and conditions of loans and bonds secured by individual government suretyship or guarantee,
§ performs loan and deposit operations
In addition to the duties above and pursuant to paragraph (4) of Section 13 of the Stability Act, ÁKK:
· (upon authorisation by law) may organize issuance of debt securities secured by government suretyship or government guarantee, or may fulfil advisory tasks related thereto;
· may participate in performing duties – advice related to business strategy also implied– related to borrowing loans and credits, or issuance of debt securities of business organization owned by the state and municipality through majority ownership;
· may participate in the management of the free cash funds of the National Deposit Insurance Fund and the Reorganization Fund, and performing duties – advice related to business strategy also implied - related to borrowing loans and credits, or issuance of debt securities of such Funds;
· may participate in managing cash fund of Investor Protection Fund.