Turnaround in monetary policy, unconventional instruments available to the central bank
The Act on the Magyar Nemzeti Bank adopted in 2013 integrated the supervision of the financial system. As a result, besides the supervision of the entire financial system (on a macro-level), the Magyar Nemzeti Bank is also responsible for the supervision of individual specific financial institutions (on a micro-level).
Not only the organisation of the MNB was reformed, but the monetary toolkit of the central bank has also been changed and modernised. While the toolkit of the central bank before the crisis was primarily the governing rate, after the crisis in 2008, especially as of 2014 the MNB’s toolbox has been extended to include more so-called unconventional instruments.
Traditional solutions were unable to address the recession caused by the crisis, so the Magyar Nemzeti Bank launched the Funding for Growth Scheme to boost corporate loans and thus the economy, and later introduced conditional central bank interest rate swap tenders to help commercial banks manage interest rate risk. Unconventional instruments also expressly included the acquisition of assets (procurement of different securities).
The crisis of 2008 revealed our vulnerability to external circumstances caused by foreign currency debts, changes in global monetary markets and severe dependence on foreign investors, as well as the exposure of our small and open economy to exports and imports. This was supported by the MNB’s Self-Financing Programme and the maintenance of an optimal level of foreign exchange reserve.
In addition to the foreign exchange reserves, the repatriation and domestic storage of gold reserves, and their increase in two steps from 3.1 tonnes to 94.5 tonnes in 2018 and 2021, has also reduced external vulnerability and increased confidence in our country.