Economy and Banking Sector of Hungary

Location Central Europe
Population (2016)9 830 485 ↓ (0.00%)
EU Status member since 2004
Economy
National Currency HUF (Hungarian forint)
    Exchange Rate (2017-01-19) 1 EUR = 308.4 HUF
GDP 
    Nominal GDP (2015)108.7 bln EUR ↑ (+0.05%)
    Nominal GDP per Capita (2015)11 100 EUR ↑ (+0.05%)
    Real GDP Growth (2015)2.9 % ↓ (2014: 3.6 %)
Inflation Rate 
    CPI, MoM (Sep 2016)0.2 % ↑ (Aug 2016: -0.4 %)
    CPI, YoY (Sep 2016)0.7 % ↑ (Aug 2016: -0.1 %)
    CPI, Year Average (2015)0.1 % ↑ (2014: 0.0 %)
Unemployment Rate (2015)6.8 % ↓ (2014: 7.7 %)
Government Bond Yield (Sep 2016)2.88 % ↑ (Aug 2016: 2.83 %)
Credit Ratings (as of Sep 2016)
    FitchBBB- good credit quality, outlook stable
    Moody'sBa1 non-investment grade speculative, outlook positive
    S&PBB+ non-investment grade speculative
Taxation
Withholding Tax 0.0 - 16.0%
Double Taxation Agreements 77 signed agreements
Information Exchange 
    Exchange on Request 2 signed agreements
    Automatic Exchange starts in September 2017
FATCA IGA in effect since 04 February 2014, Model 1
Banking Sector
Financial Market Development 4.0 (max 7.0) rank: 70th out of 138 countries
    Banks' Soundness 3.9 (max 7.0) rank: 114th out of 138 countries
Banking Industry Country Risk 7(1 - lowest risk, 10 - highest risk)
    Economy Risk 7
    Industry Risk 7
Deposit Guarantee Scheme 
    Maximum Protected Amount 100 000 EUR
Country Ceiling for Deposits 
    Local Currency (Hungarian forint)Baa2 lower medium grade
    Foreign CurrencyBa2 non-investment grade speculative
Deposit Rates (Aug 2016, HUF)0.47 % ↓ (Jul 2016: 0.52 %)
Banking Sector Structure 
    Number of Banks117
    Recent Changes (2015) new banks: 6, closed banks: 52
    Consolidated Assets (2015) 102.64 bln EUR ↑ (+1.39%)
Major Banks
 OTP Bank  CIB Bank (Intesa)
 Erste Bank  Raiffeisen Bank
 K&H Bank (KBC)  UniCredit
 MKB Bank (Bayerische Landesbank)
 List of Banks in Hungary

Hungarian Economy

National Currency

During the last 11 years EURHUF exchange rate was within the range 231.26 - 317.06, reaching its maximum in Jun 2016 and falling to its minimum in Jul 2008.

Euro to Hungarian forint (EURHUF).
Chart 1. Euro to Hungarian forint (EURHUF). Source: ECB.
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GDP

According to Eurostat, nominal GDP of Hungary in 2015 was 108.7 bln EUR.

Hungary outperforms the European Union in terms of real GDP growth with the average annual differential coming to 0.5% over the past 10 years (2005 - 2015). In 2015 real GDP growth was 2.9% which was above the Euro Area average (1.6%) and above the European Union average (1.9%). Real GDP growth in 2016 - 2021 are IMF's estimates.

Real GDP Growth in Hungary.
Chart 2. Real GDP Growth in Hungary. Source: Eurostat, International Monetary Fund.

In 2015, nominal GDP per capita in Hungary was 11 100 EUR.

Hungary has a below-average level of wealth in terms of per-capita GDP at purchasing power parity (PPP); this economic welfare indicator has, on average, fell behind that of the European Union by -27.4% over the past 10 years (2005 - 2015). GDP per capita at PPP in 2016 - 2021 are IMF's estimates.

GDP Per Capita at Purchasing Power Parity in  Hungary; European Union = 100.
Chart 3. GDP Per Capita at Purchasing Power Parity in Hungary; European Union = 100.
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Inflation Rate

According to Eurostat, inflation rate in Hungary in 2015 expressed as annual percentages of average consumer prices was 0.1% which was above the Euro Area average (0.0%) and above the European Union average (0.0%). Inflation rates in 2016 - 2021 are IMF's estimates.

Inflation Rate in Hungary.
Chart 4. Inflation Rate in Hungary. Source: Eurostat, International Monetary Fund.
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Taxation in Hungary

Withholding Tax

Withholding taxes are imposed at source of income and are often applied to dividends, interest, royalties, rent and similar payments. The rates of withholding tax are often reduced by double taxation agreements.

Withholding tax rates applied on payments of interest and dividends in Hungary are shown in Table 1.

Dividends Interest
Natural person, resident 16.016.0
Natural person, non-resident 16.016.0
Table 1. Withholding tax rates in Hungary.
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Double Taxation Agreements

Double Taxation Agreement (DTA) is an agreement between two or more countries for the avoidance of double taxation.

Hungary signed DTAs which already came info force with the following jurisdictions (for agreements which came into force after 01 January 2013 the date of coming into force is given in brackets):

 Albania
 Armenia
 Australia
 Austria
 Azerbaijan
 Belarus
 Belgium
 Bosnia and Herzegovina
 Brazil
 Bulgaria
 Canada
 China
 Croatia
 Cyprus
 Czech Republic
 Denmark
 Egypt
 Estonia
 Finland
 France
 Georgia
 Germany
 Greece
 Hong Kong
 Iceland
 India
 Indonesia
 Ireland
 Israel
 Italy
 Japan
 Kazakhstan
 Korea, Republic of
 Kuwait
 Latvia
 Lithuania
 Luxembourg
 Macedonia
 Malaysia
 Malta
 Mexico
 Moldova, Republic of
 Mongolia
 Montenegro
 Morocco
 Netherlands
 Norway
 Pakistan
 Philippines
 Poland
 Portugal
 Qatar
 Romania
 Russian Federation
 San Marino
 Serbia
 Singapore
 Slovakia
 Slovenia
 South Africa
 Spain
 Sweden
 Switzerland
 Thailand
 Tunisia
 Turkey
 Ukraine
 United Kingdom
 United States
 Uruguay
 Uzbekistan
 Vietnam

There are also several agreements between Hungary and other jurisdictions which were signed but haven't yet come into force (for agreements signed after after 01 January 2013 of signing the agreement is given in brackets):

 Bahrain (Feb 2014)
 Saudi Arabia (Mar 2014)
 Switzerland (Sep 2013)
 United Arab Emirates (Apr 2013)
 United States
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Information Exchange

There are 3 ways for jusrisdictions to exchange information on tax matters:

  • spontaneously;
  • on request;
  • automatically.

Spontaneous exchange of information is provision of information that is forseeably relevant to another party without a request being previously sent.

Tax Information Exchange Agreements (TIEAs) enable exchange of information on request relating to a specific tax investigation, either criminal or civil.

Hungary signed TIEAs which already came info force with the following jurisdictions (for agreements which came into force after 01 January 2013 the date of coming into force is given in brackets):

 Guernsey (Mar 2014)

There are also several agreements between Hungary and other jurisdictions which was signed but haven't yet come into force (for agreements signed after 01 January 2013 of signing the agreement is given in brackets):

 Jersey (Jan 2014)

Automatic information exchange allows jurisdictions to exchange information automatically, without having a specific tax investigation.

Hungary signed the automatic information exchange agreement on 29 October 2014 and committed to start the automatic information exchange in September 2017.

Further Information:
Automatic Exchange of Information on Financial Accounts
Countries Which Will Not Automatically Exchange Account Information

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FATCA

Foreign Account Tax Compliance Act (FATCA) which became law in the United States in March 2010, focuses on reporting made by foreign financial institutions about financial accounts held by US taxpayers or foreign entities in which US taxpayers hold a substantial ownership interest. The FATCA-reporting is facilitated by Intergovernmental Agreements (IGAs).

Hungary has FATCA agreement with the U.S. in effect since 04 February 2014 (Intergovernmental Agreement Model 1). Financial institutions operating in Hungary are required to identify U.S. taxpayers by January 1, 2017 and to report the information for 2017 and the subsequent years. The agreement is reciprocal: Hungarian financial accounts hold in U.S. financial institutions will be reported to Hungarian authorities.

Further Information:
FATCA and European countries

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Hungarian Banking Sector

Financial Market Development

According to World Economic Forum's Global Competitiveness Report 2016-2017, financial market development in Hungary is scored 4.0 out of maximum 7.0 and ranked 70th out of 138 analysed economies. Soundness of banks is scored 3.9 bringing Hungary into the 114th place, trustworthiness and confidence of financial market is scored 4.2 (71st place).

Financial Market Development in Hungary.
Chart 5. Financial Market Development in Hungary. Source: WEF.
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Banking Industry Country Risk

Banking Industry Country Risk Assessment (BICRA) is a methodology designed by Standard&Poor's "to evaluate and compare global banking systems". A BICRA is scored on a scale from 1 to 10, ranging from the lowest-risk banking systems (group 1) to the highest-risk (group 10). The BICRA methodology has two main analytical components: "economic risk" and "industry risk". Each of the components is then further divided into 3 "factors" that result in an economic and industry risk score for each country.

Hungary is included into group '7' with economic risk scored '7' and industry risk scored '7'.

BICRA Group 7
Economic risk 7
    Economic resilience high
     Economic imbalances high
    Credit risk in economy very high
Industry risk 7
    Institutional framework high
    Competitive dynamics high
    Systemwide funding very high
Government support assessment supportive

Table 2. BICRA for Hungary. Source: S&P's.

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Deposit Guarantee Scheme

Deposit Guarantee Schemes compensate certain deposits held by depositors of a bank that becomes unable to meet its obligations.

From a depositor's point of view it is important to know:

  • if the depositor is eligible within the terms of the deposit guarantee scheme;
  • if the depositor's bank is a participant in the deposit guarantee scheme;
  • if the depositor's type of deposit is covered by the deposit guarantee scheme.

All these details about deposit guarantee scheme in Hungary are summarised in Table 3.

Scheme Participantsall credit institutions operating in Hungary (including branches of foreign banks), branches of Hungarian banks abroad
Eligible Depositorsnatural persons, legal entities
Covered CurrenciesEEA currencies
Maximum Protected Amount100 000 EUR
Paid In CurrencyHUF

Table 3. Deposit guarantee scheme in Hungary.

EEA stands for European Economic Area and consists of all EU member states plus Liechtenstein, Norway and Iceland.

EEA currencies are all official currencies of EEA members. Switzerland is not a EEA member, but because CHF is the official currency of Liechtenstein, CHF also belongs to EEA currencies.

So, only the deposits made with Hungarian banks in the following currencies are covered by the deposit guarantee scheme of Hungary

 EUREuro
 BGNBulgarian lev
 CZKCzech koruna
 DKKDanish krone
 HUFHungarian forint
 ISKIcelandic króna
 CHFSwiss franc
 NOKNorwegian krone
 PLNPolish złoty
 RONRomanian new leu
 SEKSwedish krona/kronor
 GBPPound sterling

It should be also noted that deposits in non-EEA currencies (for example, USD and JPY) are not covered by the Hungarian deposit guarantee scheme.

Further Information:
Deposit Guarantee Schemes in Europe

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Country Ceiling for Deposits

Moody's country ceilings for deposits specify the highest rating that can be assigned to local- or foreign- currency denominated deposit obligations of a bank or other deposit taking institution domiciled within that country.

Local currency (Hungarian forint) deposit ceiling for Hungary is set to Baa2 (lower medium grade), foreign currency deposit ceiling is Ba2 (non-investment grade speculative).

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Deposit Rates

In Aug 2016, an agreed annualised deposit rate in local currency (Hungarian forint) of new contracts with agreed maturity up to 1 year between credit institutions and households was 0.47% .

Deposit Rates in Hungary.
Chart 6. Deposit Rates in Hungary. Source: ECB.

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Banking Sector Structure

Currently there are 117 credit institutions operating in Hungary.

Recent structural changes (2013 - 2015) of the banking sector of Hungary are summarised in Table 4.

201320142015
Number of Opened Banks006
Number of Closed Banks0052

Table 4. Recent structural changes in the banking sector of Hungary.

All the credit institutions operating in Hungary can be classified into several categories. Table 5 summarises the number of banks in each category.

CategoryNumber of Banks
Banks35
Branches of foreign banks7
Building societies4
Central banks1
Mortgage banks5
Savings banks65

Table 5. Number of banks by category in Hungary.

The list of the most recently opened banks in Hungary is provided in Table 6.

There are 7 branches of foreign banks from 6 different countries in Hungary. Table 7 shows the number of branches grouped by the country of origin.

Country of OriginNumber of Branches
 France2
 Belgium1
 Portugal1
 Ireland1
 Netherlands1
 Austria1

Table 7. Number of branches of foreign banks in Hungary grouped by country of origin.

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