Hungary: Savings Co-operatives (1992)

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      This document has been made available in electronic format
           by the International Co-operative Alliance ICA      

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                      HUNGARY: SAVINGS CO-OPERATIVES
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Source : Janos Juhas :  Co-operatives in Eastern and Central
Europe, Hungary; Studies & Reports, Twenty-first in series; ICA,
Geneva, 1992, 61pp., price 20 Swiss Francs


Savings Co-operatives:

The savings co-operatives are financial institutions that aim to
provide the widest possible variety of financial services to
their members. They operate mostly in villages and country towns,
but there are savings co-operatives in urban areas as well. Since
1991, the minimum capital requirement for the establishment of
a savings co-operative has been HUF 50 million. This may be
reduced to HUF 25 million if the co-operatives join a mutual
insurance fund. 

                    Savings co-operatives
                    *********************

Co-operatives                                     260.0  
Members (thousands)                             2,000.0 
Employees (thousands)                              10.0  
Share capital (million HUF)                     1,456.0  
Deposits (million HUF)                         53,226.0 
Loans (million HUF)                            34,225.0  
Share (in total resources)of banking sector,%       5.0  
Market share (in terms of total deposits of 
the population),%                                  17.4
Number of branch offices                        1,800.0
of which: in rural settlements                  1,500.0 
     in urban settlements                         300.0 


In Hungarian savings co-operatives, open and voluntary membership
prevails. No common bond is observed: any Hungarian  citizen may
join any savings co-operative. Full membership is gained by the
purchase of one co-operative share of HUF 500. In the co-operative, the one member - one
vote principle prevails and all forms of democratic self-government may be seen. As a
special provision of the savings co-operativu legislation two thirds of the board of
directors should be elected from co-operative members not employed by the co-operative. The
operation of the savings co-operatives includes active and passive banking transactions,
non-financial services and other activities made on commission. As of 1990, savings
co-operatives are entitled to do business not only with individuals but also with legal
entities. This is quite in line with the objective of savings co-operatives to become the
predominant banking structure in rural areas. Some of their main activities are listed
below:

-    collection of deposits (it should be noted at this point
     that savings deposited with savings co-operatives are
     protected by state guarantee).

-    provision of credit and loans to individuals (this also
     includes small-businesses).

-    provision of credit to legal entities

-    issue of, and trade in, securities (the first needs special
     authorization on a case-by-case basis and the latter
     includes the handling, deposit and negotiation of
     securities, e.g. bonds etc.)

-    investment activities

-    issue of cheques and credit cards (this is, as yet, a
     theoretical possibility rather than reality)

-    various financial services provided on commission (e.g.
     purchase and sale of foreign currencies; marketing of
     insurance products; sale of lottery and soccer pools
     coupons, etc.). 

The typical savings co-operative has 7700 members, and 5 or 6
branch offices. Its total assets amount to HUF 260 million and
its capital is some HUF 16 million including share capital and
accumulated capital. The average savings co-operative collects
HUF 210 million deposits from individuals and has some HUF 30
million additional resources such as deposits from legal
entities, surplus, etc. Fixed assets, including real estate, come
to about HUF 8-9 million. A typical savings co-operative provides
HUF 95 million in loans to its members and another HUF 15 million
to legal entities. 


Savings Co-operatives:

The savings co-operatives are financial institutions that aim to
provide the widest possible variety of financial services to
their members. They operate mostly in villages and country towns,
but there are savings co-operatives in urban areas as well. Since
1991, the minimum capital requirement for the establishment of
a savings co-operative has been HUF 50 million. This may be
reduced to HUF 25 million if the co-operatives join a mutual
insurance fund. 

                    Savings co-operatives
                    *********************

Co-operatives                                     260.0  
Members (thousands)                             2,000.0 
Employees (thousands)                              10.0  
Share capital (million HUF)                     1,456.0  
Deposits (million HUF)                         53,226.0 
Loans (million HUF)                            34,225.0  
Share (in total resources)of banking sector,%       5.0  
Market share (in terms of total deposits of 
the population),%                                  17.4
Number of branch offices                        1,800.0
of which: in rural settlements                  1,500.0 
     in urban settlements                         300.0 


In Hungarian savings co-operatives, open and voluntary membership
prevails. No common bond is observed: any Hungarian  citizen may
join any savings co-operative. Full membership is gained by the
purchase of one co-operative share of HUF 500. In the co-operative, the one member - one
vote principle prevails and all forms of democratic self-government may be seen. As a
special provision of the savings co-operativu legislation two thirds of the board of
directors should be elected from co-operative members not employed by the co-operative. The
operation of the savings co-operatives includes active and passive banking transactions,
non-financial services and other activities made on commission. As of 1990, savings
co-operatives are entitled to do business not only with individuals but also with legal
entities. This is quite in line with the objective of savings co-operatives to become the
predominant banking structure in rural areas. Some of their main activities are listed
below:

-    collection of deposits (it should be noted at this point
     that savings deposited with savings co-operatives are
     protected by state guarantee).

-    provision of credit and loans to individuals (this also
     includes small-businesses).

-    provision of credit to legal entities

-    issue of, and trade in, securities (the first needs special
     authorization on a case-by-case basis and the latter
     includes the handling, deposit and negotiation of
     securities, e.g. bonds etc.)

-    investment activities

-    issue of cheques and credit cards (this is, as yet, a
     theoretical possibility rather than reality)

-    various financial services provided on commission (e.g.
     purchase and sale of foreign currencies; marketing of
     insurance products; sale of lottery and soccer pools
     coupons, etc.). 

The typical savings co-operative has 7700 members, and 5 or 6
branch offices. Its total assets amount to HUF 260 million and
its capital is some HUF 16 million including share capital and
accumulated capital. The average savings co-operative collects
HUF 210 million deposits from individuals and has some HUF 30
million additional resources such as deposits from legal
entities, surplus, etc. Fixed assets, including real estate, come
to about HUF 8-9 million. A typical savings co-operative provides
HUF 95 million in loans to its members and another HUF 15 million
to legal entities.