Hungary prime minister (PM) Viktor Orban has reportedly exempted a three-way bank merger from facing competition scrutiny.
The government has issued an order allowing merger of Budapest Bank, MKB Bank and savings group Takarekbank (MTB), Reuters reported.
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The three-way bank merger is expected to create the second-largest bank in Hungary.
The government argued that the amalgamation of these banks will boost the competitiveness in the banking sector of the country.
The three banks first announced their plan to merge their business back in May 2020.
The proposed merger will create a new entity, called Magyar Bankholding, which is in line with the shake-up of Hungarian banking system.
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By GlobalDataThe combined new entity will be worth over HUF740bn ($2.5bn), the report added.
The state will own a 30.35% stake in the new bank, while MKB Bank owners, including Orban’s ally Lorinc Meszaros, will hold 31.96% stake and Takarekbank will own 37.69% stake.
Background
At the end of 2019, MKB exited a European Union (EU) restructuring process.
As a result, the private banking company was banned from acquisitions and the country imposed limits on the size of its balance sheet.
Moreover, the central bank of Hungary (MNB), which is currently led by Orban’s close ally named Gyorgy Matolcsy, has been arguing that several big banks in the country were “too costly”, based on their market size, banking services and loans.
To compete with rivals OTP, Austria’s Erste Group, and Belgium’s KBC, MTB has been working to transform itself into a universal banking group. The lender has an extensive rural branch network.
The amalgamation project continues to face challenges.
It is now grappling with a deep economic downturn due to the Covid-19 pandemic, which could trigger a surge in bad loans.
