The Hungarian state has recently acted as an almost unlimited bank buyer. It has acquired subsidiary banks with significant Hungarian market share, wholly or partly in debt, from their foreign parent banks. While sales were made in secret backdrop, it seemed as if everyone had forgotten that the bank was actually made up of customers whose fortunes, loans, deposits, and even everyday banking were even heavily influenced by these decisions. What will happen to customers?
Purchased by the state
Over the past 1-2 years, the Hungarian state has acquired majority ownership in the Savings Bank (its effect extends to the entire savings cooperative sector), Minda Bank and Nucapest Bank , minority ownership in Brandt Bank and Ernie Bank , and according to some MoneyTime Bank also in Hungary . The government intends to resell all state-owned banking properties to private operators within three years, allowing customers of these banks to prepare for another change of ownership soon. In addition, Wisemen Bank’s retail customers may be preparing to be taken over by other Hungarian banks, and the fate of Ruffsen Bank’s retail customers is also questionable.
Thus, besides the numerous savings cooperatives, the clients of 6-7 national large banks are also affected by the changes.
Should I stay or should I go?
As a customer, the number one question is obviously, is it worthwhile to anticipate the changes and quickly switch to a “more secure” bank? We can say no to this unless the change of bank is on the verge of being there anyway.
Changing the majority ownership in a bank is usually a slow process. First, they screen the bank, then agree on the purchase price , and finally sign the sale. Subsequently, the new owner will hold a general meeting , which will elect new management (while also confirming the remaining members of the old management), and the bank’s new policy and products will be implemented by the newly appointed directors through the new organization.
If a bank owns a new bank (ie not the state), this transformation will be further slowed down by the change of image and the introduction of new banking products, and if the new buyer is a bank already operating in Hungary, it will almost certainly integrate the purchased bank will provide its products to its own system and will then provide its services under a single brand name , which will take the longest lead time.
Thus, in the case of a majority change of ownership, long months go by for seemingly uneventful times, during which changes and developments take place only in the background, and the client does not notice anything about it. There is plenty of time to think about switching banks if the new owner comes up with your offer and you don’t like it. If we switched before we knew the offer, we could be even worse off. Mostly, the products of the old owner (ie bank accounts, loans, etc.) will usually remain in the new bank for the customers of the acquired bank.
In the case of minority ownership changes , however, it is likely that those who have previously owned the majority will continue to do so in the future, so there is no need to make major changes there. In this case, the least attention should be paid to the change of ownership.
Can I get worse?
Sometimes. In the case of a change of majority ownership or the purchase of a banking business by another bank, the new bank may decide not to take over some of the old bank’s products, especially if they are very customer-friendly. For example, when Creditcom Bank sold its credit card portfolio to Nucapest Bank , the latter did not take over the Yamaha credit card, which offered a 3 percent cashback on every purchase, which was by far the best deal on the market, making it less profitable. But we can do just as well. At Creditcom, however, everyone received a gallant offer: if they paid their debts to the old owner in lump sum, they did not have to renegotiate with the new bank, and they also released 10 percent of their debt.
Former ENG Bank retail customers also benefited from signing a contract with Wisemen Bank , which acquired the business for months, and were the first to try the bank’s newly developed bank card, which even Wisemen Bank’s existing customers could not get at first.
So we lose nothing, and we can even win if we wait for the new bank’s offer, as it may even be that everything remains the same. In any case, the new bank will provide timely information on the changes, and even if it is a divestment, a re-contract is likely to take place.
So it is worth waiting for the developments, but in the meantime it might be advisable to work out a “Plan B” in the event of a worse offer. For example, we can use Rise Bank’s online calculator to filter up-to-date offers from mortgage , personal loan , credit card , retail bank account , corporate bank account to see if it is better in the market than the new bank offer.
Changing services and risks
However, clients need to keep an eye out for some important things, even if they think it doesn’t matter who the owner is, as the bank will definitely continue to operate within its legal framework. At the very end of 2014, the example of SecretOne Bank , which went bankrupt and nearly half of which was partly state-owned, showed that customers could not trust everything in the bank, even if it was partly owned by the Hungarian state .
As we have mentioned, the new owner has the right to offer other, even less favorable, terms and conditions, so the fees, interest rates, repayment terms of the loans may change, and the early replacement of credit cards may be considered (of course free of charge). A change of majority ownership may also have the effect of closing certain branches , changing the customer service telephone number, the Internet Banking interface, the usual identifiers and the SMS sending phone number.
Changing services also carry risks
On the one hand, the state-owned government , which stretches to 49 per cent but remains in minority ownership, offers no guarantee against bankruptcy , as the SecretOne Bank demonstrates. Thus, a bank is no more secure simply because the Hungarian state has bought or recapitalized it. There is one way to protect yourself from bankruptcy: you should not keep more than one deposit limit per depositor in a single bank, but divide it across multiple banks. Depositors are compensated by the National Deposit Insurance Fund (OBA), while investors are compensated by BEVA (Investor Protection Fund) in the event of bank failure.
OBA up to $ 100,000 per depositor and bank and BEVA up to $ 20,000 per investor and aggregate up to $ 20,000, including $ 100 million and $ 1 million above $ 1 million up to 90 percent of all payments.
However, the situation is quite different when a bank is also majority-owned by the state . In this case, there is no need to be afraid of bank failure, but some risks need to be addressed here as well.
Beyond the risks of a general majority change of ownership described above, the transfer of majority ownership to a public bank would most likely result in a merger with other public banks of similar fate. The same can happen if you buy a bank from another privately owned commercial bank in Hungary.
Government sources have already confirmed that the newly acquired Minda and Nucapest banks are going to be merged into a single larger bank, which will not only make these credit institutions more efficient, but will also facilitate the achievement of state strategic goals for the banking sector. (This is ultimately why the banks are being bought up by the state, especially for majority holdings.)
You should pay more attention to deposit insurance again
Because if you have a deposit in both banks and your combined deposit in both banks is over $ 100,000, then it is advisable to transfer the excess to another bank. (As deposit insurance also covers interest, it is advisable to reduce the deposit amount held by one bank at $ 100,000 with the expected interest.)
When the state sells its majority-owned banks, they will again be privately owned. In the case of a Hungarian majority-owned private bank, the operation of the bank entails a higher risk, as there is no foreign parent bank to replace any missing capital, as the savings cooperatives besides the SecretOne Bank have proved. Therefore, in these banks, it is also advisable to stretch only to the upper limit of deposit insurance , thus practically avoiding the risks.
Which you definitely do not have to fear
When buying minority or majority state-owned shares, there is no need to fear that the state will provide greater insight into private clients’ money or even the privatization of private money . The prime minister himself declared in January 2012, when the impending nationalization of deposits spread, that bank contracts were private contracts over which the state had no influence. And the National Tax and Customs Administration cannot look at any bank contract or account balance simply because the bank is state-owned: data management rules and bank secrecy apply to all banks, regardless of the owner.
The reverse is also true: under the money laundering rules , cash flow above a limit must be reported by a commercial bank to the tax office as well as by a public bank.
These rules are independent of whether a bank is publicly or privately owned.