Capital Flight Risk: Banks Raise Red Flag Over New Bill on Foreign Funding in Hungary
- 27 May 2025 9:01 AM
- Hungary Around the Clock
Banks have warned that the government’s transparency bill on cutting off foreign funding for NGOs, media outlets and others is eroding confidence in the domestic financial system, which could lead to capital flight from the sector.
The legislation seeks to tighten controls on foreign influence through financial surveillance and reporting obligations that bankers say are technically unfeasible.
Sources said the legislation shows a “complete lack of understanding” of how the financial system operates. There are technical questions as to what constitutes “direct or indirect” foreign funding, and whether banks would be expected to start monitoring organisations when they are blacklisted, or only when notified by the tax authority.
Banks would also be expected to screen money transfers, including donations, foreign-currency transactions, and past account activities.
They also warn that the new proposal would make state oversight of transactions possible without clear safeguards.
Wealthy individuals are reportedly already seeking advice from banks on offshore savings and account management options, citing fears that personal data, assets, and even banking secrecy could be compromised, according to the banks.
Some investors are questioning whether their financial affairs remain safe in a country where the law could potentially be used against anyone under the guise of defending national sovereignty, Telex adds.
Bankers have also warned that the legislation, if approved, could trigger downgrades in Hungary’s credit ratings, raising borrowing costs and damaging investor sentiment.
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