At the beginning of year 2000, Hungary has had one of the healthiest banking and financial systems in the Central European region. Its financial system is basically privately owned: public sector participation in the banking system is less than 20%, in the insurance field is even less. The development and modernisation of the Hungarian financial system through the last decade took place with significant foreign participation. The presence of foreign financial institutions in the system is outstanding by all standards. Participation of international banks in the Hungarian system, taking into account its capital base, is more than 65%. Major European Union banking institutions as well as certain American banks are playing active role on the Hungarian market that consists of 42 different banks altogether. This may be attributed to the fact that establishment and incorporation of foreign controlled financial institutions is permitted by law once the legal requirements are fully met.

 

In the insurance sector the foreign participation is close to 90%, while investment firms are in 70% foreign controlled. The Hungarian financial sector is though extremely open to international trends and developments creating an organic link between the Hungarian and the global marketplace.

 

The legal background of the Hungarian financial sector and the relevant regulation is following substantially the European directives and standards. The financial sector regulation is supposed to be in full conformity with the European regulation by 2002 the latest. All major sectoral laws relating to banking, insurance, securities, mutual funds and private pension funds are in the process of revision to ensure appropriate and EU conform legislation.

 

The national currency, the Hungarian Forint, is convertible since 1996. The Forint exchange rate is pegged to the Euro and it may move within a band of +/- 2,25%. International current invisible operations are fully liberalised and most capital movement items are also restriction free.

 

The Budapest Stock Exchange its one of the most active and vivid in the Central European region. Its market capitalisation amounts to 63% compared to the GDP, highest in Central Europe, and its average daily turnover reaches 64 billion Forints. Major Hungarian securities are also traded in some important stock exchanges like Frankfurt, London or New York.

 

The Hungarian financial system is providing an excellent financial infrastructure for all companies acting in Hungary, foreign and domestic alike. There is a fierce competition among banks; insurance companies and other financial service providers to obtain larger market share in different market segments. The banking industry and other financial services are highly computerised and backed by the latest information technology. Banking and credit cards are very widespread: its extensive use is matching European levels.

 

Within the sector the National Bank of Hungary is responsible for the conduct of the monetary policy, oversees the appropriate functioning of the payment system and it also acts as foreign exchange authority. The supervision of the banking, insurance, securities industries and the private pension funds are falling in the competence on the newly established integrated Hungarian Financial Supervisory Authority. The main role of the authority is to ensure the smooth and orderly operation of the financial markets, to maintain market confidence and improve consumer awareness about the financial markets.

 

Hungary is a member of the IMF since 1982 and the OECD since 1996. The