No progress for the time being in Revolut becoming a subsidiary bank

Revolut Bank has still not submitted its application for being licensed as a subsidiary bank in Hungary, despite the fact that the MNB is continuously pressing for it, bearing in mind the security of several hundred thousand Hungarian customers and potential depositors and the stability of the Hungarian financial market. In this situation, the Magyar Nemzeti Bank is not in the position to supervise the business integrity of Revolut Bank, and Hungarian customers will have to take their potential deposit insurance, consumer or settlement disputes to Lithuania rather than settling those in Hungary.

Revolut Bank – which claims to have already several hundred thousand customers in Hungary – operates in Hungary as a cross-border institution rather than holding a Hungarian banking licence. Meanwhile, in addition to its previous subsidiary, pursuing payment activity, it also has the possibility – through its licence acquired in another EU Member State, namely in Lithuania – to pursue lending and deposit collection in Hungary.

At present, the prudential and consumer protection supervision of the cross-border bank is the competence of the Bank of Lithuania rather than of the Magyar Nemzeti Bank. At present, the Magyar Nemzeti Bank, in it is capacity as “host country” supervisory authority, has only limited competence also in the field of consumer protection: in matters breaching consumers’ interest and the public good it may initiate actions primarily at the home country’s (Lithuanian) supervisory authority. On the other hand, the MNB will continue to take firm actions at all times in the future as well within this legislative framework and inform the public of any suspected risk or infringement that may occur.

This situation would not change even if – as some press reports suggest – Revolut continued to render banking services across Europe with the authorisation of the European Central Bank (ECB).

In this situation, should any problem occur, the 18 million Revolut customers, including the Hungarian depositors, would be able to seek compensation for their funds at the Lithuanian deposit insurance scheme (which also guarantees a maximum payment of EUR 100,000 per depositor) rather than at the Hungarian one. On the other hand, in the case of Hungarian subsidiary banks this guarantee is provided by the National Deposit Insurance Fund (NDIF). The available assets of the Lithuanian Deposit and Investment Insurance (DII) fall significantly short of those of NDIF.

In addition, should a Hungarian customer incur any settlement, consumer or deposit insurance problem, he or she may essentially seek legal remedy in the matter only in Lithuania (subject to international arbitration procedure), presumably in Lithuanian or English.

Accordingly, with a view to protecting customers’ interest, the MNB firmly maintains its opinion that Revolut Bank should pursue its activity as soon as possible as a well capitalised Hungarian subsidiary bank with registered office in Hungary, falling within the supervisory competence of the Magyar Nemzeti Bank. However, despite the MNB’s several initiatives, Revolut Bank has not yet launched the licensing procedure for the domestic subsidiary bank.

The MNB supports, at all times, the strengthening of competition in the Hungarian financial markets, as it encourages market participants to implement innovations, developments and to operate more efficiently, at the same time providing their customers with higher quality, simpler and faster services. However, these trends must not conflict with the interests of domestic customers, which take priority under any circumstances.

Source: Magyar Nemzeti Bank