Hungarian National Bank worried, wants Revolut to open Hungarian subsidiary

The Hungarian National Bank (Magyar Nemzeti Bank – MNB) is still pushing for Revolut to operate as a Hungarian subsidiary bank, the national bank stressed in a statement on Monday. The MNB said that in order to protect Hungarian customers, they want the fintech bank to "operate as an institution with a Hungarian headquarters and sufficient capital, under the supervision of the Hungarian Central Bank".

Revolut has continued to operate as a cross-border service provider, so Hungarian customers are still not be able to settle any disputes with the bank in Hungary, and the Hungarian deposit guarantee scheme does not cover their deposits held at Revolut Bank, the statement said.

The MNB has raised concerns about Revolut's operations several times before – for example, in a statement last July – which were also due to the fintech bank not having opened a Hungarian subsidiary.

The MNB's latest statement comes following recent news that Revolut's auditor said there was a risk of substantial misstatements in the UK company's 2021 revenue report (the company reported that it was its first profitable year). "The auditor was unable to satisfy itself to the required level of assurance about three quarters of the UK company's revenue for the year (£477 million, partly cryptocurrency-based) in question," the MNB says, adding that this could be a departure from reality. They note that the lack of audit approval of the information in a company's books "is a significant risk element for any company, but especially for a multinational financial institution".

For Hungarian customers, electronic financial services are provided by the Lithuanian Revolut Bank UAB (Revolut Bank), a subsidiary of Revolut Ltd. The MNB reiterated its previous position that it would be in the interest of Hungarian customers if Revolut Bank were to operate as a Hungarian subsidiary bank.
Revolut Bank's EU supervising authority, the Lithuanian supervisor, had previously informed the MNB that the bank intended to establish a branch (i.e. not a subsidiary bank) in Hungary. However, Revolut has not yet started this activity either, and is still only present in the country as a cross-border service provider. The risks of this have also been communicated to customers by the Hungarian central bank, the statement said.

In the current situation, the MNB only has limited powers in terms of consumer protection, while "depositors are also protected by the Lithuanian (and not the Hungarian) deposit guarantee scheme" – the difference is not clear from the statement. Additionally, Hungarian customers are supposed to turn to the Lithuanian authorities for redress, the central bank adds. Revolut would also benefit from opening a bank in Hungary, the MNB added, noting that the Hungarian central bank "continuously monitors the sound functioning of domestic credit institutions through ongoing supervision, annual schedules and other inspections".