THE European Central Bank (ECB) has misgivings about a Hungarian central bank vehicle designed to purchase distressed commercial real estate portfolios from local banks, the ECB said Tuesday.

    The concerns center on the independence of the National Bank of Hungary (MNB) and issues regarding state aid.

    The loan vehicle, MARK Group, had been due to start buying bad loans from commercial banks using central bank funds worth up to 300 billion forints (US$1.11 billion) soon in a bid to revive a frozen market and get banks to lend more to companies.

    But MARK, first conceived a year ago and formally launched in November, is mired in a protracted regulatory debate with the ECB and the European Commission, hindering its launch just as market demand for such assets is rising.

    “MNB is currently discussing issues (with the ECB) related to the financial independence of MNB and to the compliance with the (EU) Treaty prohibition of monetary financing,” a press official said in an emailed response to questions.

    The official, who declined to be named, said the MNB was also in talks about state aid concerns with the European Commission, confirming a story reported by Reuters on Monday.

    Under Governor Gyorgy Matolcsy, an ally of Prime Minister Viktor Orban, the MNB has launched a string of measures including steep rate cuts and a massive monetary stimulus program to boost economic recovery.

    The debate over MARK represents the first major stumbling block in Hungary’s ties with the ECB since Matolcsy, Orban’s former economy minister, took over at the bank in 2013.

    Although Hungary is not a member of the eurozone, it nonetheless has to consult with the Frankfurt-based ECB on issues affecting its central bank.

    MARK chief executive Csaba Kandracs told Reuters it was unlikely that the concerns of the EU Commission and ECB would torpedo the project altogether.

    He said the ECB was questioning why Hungary launched a “bad bank” after the crisis had subsided and no banks needed rescuing.

    The ECB did not elaborate on when it expected the outstanding issues to be settled. MARK hopes to start operating in the summer and make its first deal by the end of this year. (SD-Agencies)