The Hungarian Central Bank fears its independence

The government wants to expand supervision over the local central bank, which may harm financial stability.

The Hungarian Central Bank has sounded the alarm over the planned change in the law by Prime Minister Viktor Orbán's government. The Hungarian Central Bank said in a statement on Tuesday that the planned change to the central bank law would affect its independence. The project could also harm financial stability. The government wants to expand supervision over the local central bank.

The government may discuss the proposed law as early as tomorrow, Wednesday. She had stated that the new law would not affect monetary policy. The national currency, the forint, fell to its lowest level in a year at 398.60 against the euro in the afternoon after the central bank warned that its independence may be diminished.

The European Central Bank (ECB) did not identify any major problems with the proposed change in a statement published on February 26. However, she stressed that this should not undermine the ability of the National Bank of Hungary to independently carry out a task that falls within the scope of the European System of Central Banks (ESCB). The ECB includes the European Central Bank and the national central banks of all EU countries. Although Hungary is a member of the European Union, it is not a euro country.