Government Rolls Out Deposit Rate Cap For Institutional Investors

Commercial banks in Hungary cannot pay an interest rate that is higher than the yield on the three-month discount bill on deposits by certain large institutional and private investors, the Minister for Economic Development said on Monday. (Reuters News)

• Marton Nagy, a former central bank deputy governor, told state news agency MTI that the step was aimed at investors who took advantage of high central bank rates by investing their money in central bank deposits through commercial banks.
• Under the measure outlined by Nagy, until March 31, 2023 commercial banks cannot pay an interest rate that is higher than the yield on the three-month discount bill on deposits by investment companies, savings banks, building societies, investment funds and private citizens' deposits of more than 20 million forints ($49,980.01).
• These investors made use of high central bank rate and "they realized a risk-free interest rate of up to 18% that was, in the end, paid by the state," Nagy said.
• The central bank did not immediately respond to questions from Reuters on the new regulation.