Hungary’s biggest financial scandal, which broke earlier this year, involved the alleged issuance of more than $500 million of phony bonds by Quaestor Financial Hrurira. The brokerage was one of three firms charged with fraud.
The country’s Investor Protection Fund (BEVA), which is primarily funded by banks and other financial services companies, will have to compensate investors for damages.
That could get expensive. The Hungarian parliament in April voted to up the maximum payment to each victim to 30 million forints ($108,000), or five times BEVA’s previous limit. About 32,000 clients invested in the bonds.
The vote has bank executives in Hungary howling. Sándor Csányi, chief executive of OTP Bank—the country’s largest lender—says it is unfair that banks will have to bear the brunt of the costs even though they were not implicated in the fraud. OTP is the largest contributor to BEVA.
An affiliate of Quaestor also issued bonds—real ones—but has since filed for bankruptcy. Holders of the legitimate debt securities are not covered by BEVA. One complication: The central bank admits that it is impossible to tell the genuine bonds from the fake ones.