Basel Ii Hungarian Aspects And Specialties
1. Short historical overview of the country, changes in the monetary policy of Hungary
1.1 The general history of Hungary should be started by the end of communism with the major significant changes politically as well as economically.
In 1989 the huge Soviet impact on the Eastern European countries broke down and the countries could breath up after a dictatorship. These countries, among them Hungary, could organize the first democratic election.
During the following years there was a rapid continuous growth in these countries, whereas the differences among these states were growing as well.
The privatization began and the framework of the economy and business life took place. Hungary pinned down itself to join the European Union as fast as possible and to terminate the majority of corruption in the country.
The bank consolidation also started by the end of communism and the country was the first, who attempted to build up a healthy bank system after the “mono-bank system” of the late regime.
The Hungarian Central Bank (Magyar Nemzeti Bank) was hindered by the deficit of financial markets and the restrictions of the competition among the banks till the beginning of the 90s. Therefore, the central bank did have the appropriate instruments of monetary policy. But due to the growth of the inflow, the increase of the savings and the changes of institutional conditions (new Banking Act, Insolvent Act and Accountant Act) the economy became more opened and the terms of competition became stronger in the directly regulated bank system. After these the central bank was able to develop its tools of monetary policy.
During the first years the instrument “legal reserve ratio” played a huge role as the MNB could use only the market-type indirect instruments because of the relative underdevelopment of financial markets. So the MNB could regulate the liquidity by changing this ratio – through...
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