Major brokerage house investigated for fraud
March 4th, 2015Pundits both on Right and Left fear that trust in banks and financial markets will weaken as the National Bank suspends operation of the Buda-Cash brokerage house, and estimates that as much as 100 billion Forints may have been embezzled.
The National Bank filed a criminal complaint after suspending Buda-Cash brokerage’s services, appointing a commissioner to control operations and freezing all its accounts (including accounts at four small lenders owned by Buda-Cash) last week. According to the estimates of the National Bank, Buda-Cash has been involved in massive fraud, and according to the National Bank’s preliminary estimate, cannot account for as much as 100 billion Forints of clients’ money.
The Buda-Cash debacle will further deteriorate trust in stock markets and financial investments in general, Emese F. Szabó writes in Népszabadság. Hungary would need to boost savings, but if brokerage firms cannot be trusted, it is more likely that Hungarians will choose very conservative ways of saving rather than buying stocks. In an aside, Szabó notes that the government’s measures and rhetoric have also fuelled anti-bank sentiments. Szabó criticizes the National Bank for suggesting that the total losses may amount to as much as 100 billion Forints, rather than trying to calm markets and investors.
In Magyar Nemzet, Anna Szabó finds it outrageous that the Buda-Cash management has not yet been put under arrest. The conservative commentator fears that the owners of the brokerage may flee and then it will be impossible to recover the losses from their own private assets. Szabó also fears that the scandal may significantly impair investors’ trust. She goes on to point out that the National Bank’s share of responsibility should also be considered, since it also acts as a financial regulatory authority. In conclusion, she notes that in the light of the Buda-Cash scandal it is less than surprising that many Hungarians have no trust in the Hungarian banking sector. While savings have been growing and now amount to 80-90 per cent of GDP, half of those savings are deposited in banks outside Hungary.