Some portray Hungary’s banking sector as fragmented; certainly, Minister for National Economy Márton Nagy seems to think so. Yet others say core indicators suggest a system that is profitable, well capitalized and structurally stable. Bernadett Herman, banking market expert and contributor to the Hungarian financial and business news portal Privátbankár, tells the Budapest Business Journal there is no professional need for consolidation, that banking costs are driven primarily by state burdens rather than competition, and that mergers ultimately serve shareholders, not customers.
Budapest Business Journal: Is there a professional need for further consolidation in the Hungarian banking sector today?
Bernadett Herman: There is no such necessity. Banks are profitable, well-capitalized, and with stable capital positions. The integration of the savings cooperatives into Takarékbank was a massive consolidation process that started about 10 years ago, followed by the mergers of Budapest Bank and MKB, and eventually their integration with Takarékbank. Since then, only minor sales have taken place, and those were not driven by structural problems in the Hungarian market but by other considerations.
BBJ: Which objective indicators (such as cost-to-income ratios, non-performing loans, capital adequacy, or digitalization-related CAPEX needs) might suggest that there are “too many” banks operating in Hungary?
BH: I do not see any such indicator. Other European countries of similar size to Hungary also have a similar number of banks, according to data from the European Banking Authority.
BBJ: What pushes banking costs higher in practice: market fragmentation and parallel infrastructures, or regulatory compliance and state levies such as special taxes and fees?
BH: According to calculations by the Hungarian Banking Association, banks paid HUF 842 billion to the state budget last year on top of the standard corporate tax. Spread across Hungary’s 7.85 million voters, that equals about HUF 107,000 per person. Banks must recover this money somewhere. They obviously cannot do so through basic account maintenance alone, so these costs are built into the pricing of many other services. Without these heavy public charges, banking would be significantly cheaper.
BBJ: In a market of Hungary’s size, does consolidation typically reduce or increase retail fees and lending rates, and under what conditions can the direction change?
BH: Retail fees are strictly regulated. If a bank acquires another bank’s retail portfolio, it cannot arbitrarily raise fees; it can only maintain them at existing levels or adjust them in line with legal rules. Interest rates largely depend not on banks but on the rates at which the state can issue government bonds, the inflation environment, and the base rate. The forint’s interest rate sets the framework, and bank rates follow that.
BBJ: Where is the line of “healthy concentration?” At what market concentration levels does competition begin to deteriorate materially?
BH: I cannot define a precise threshold. Competition authorities always examine whether a merger would significantly harm competition. If they see such a risk, they intervene by either blocking the merger or imposing conditions, such as requiring the sale or exclusion of certain portfolio elements.
BBJ: From a systemic risk perspective, what would it mean if a few large banks dominated the market? Would the “too big to fail” problem intensify, and how can prudential tools address this?
BH: If banks are sufficiently well-capitalized and operate prudently, there is no real risk. The central bank regularly monitors this. In Hungary, most banks have foreign owners who can provide capital if needed; there is also a resolution fund, and, in a worst-case scenario, the IMF could be involved. But the banking system is currently very far from any credit crisis. After the 2008-2009 crisis, regulations were tightened significantly worldwide.
BBJ: How would consolidation affect SME lending and corporate financing? Would economies of scale improve credit availability and pricing, or would competition shrink and access thresholds rise?
BH: At present, the SME lending market is dominated by state-subsidized loan schemes, which banks offer under broadly similar conditions. Large corporates are in a strong position vis-à-vis banks; they can also raise financing abroad and often take foreign-currency loans because they are cheaper.
BBJ: On the retail access side (branch networks, ATM and POS coverage), does consolidation bring rationalization and closures, or service quality improvements?
BH: Branch networks have been shrinking for years, and consolidation could accelerate that trend. For ATMs, however, the government expects banks to increase their numbers, so reductions are not an option. The same applies to POS terminals, as merchants want to accept card payments.
BBJ: In terms of innovation and digitalization, does a larger bank size speed up technological investment, or does having fewer players slow product and service innovation?
BH: This primarily depends on management and ownership decisions. How much a bank invests in technology is a strategic choice, often determined at an international level.
BBJ: If the goal is cheaper banking and more efficient operations, what alternatives exist beyond consolidation, such as fee transparency, or easier account switching, and how effective could these be in Hungary?
BH: The central bank continuously examines these options and makes proposals. The tools for easy bank switching already exist; it depends on whether customers use them. Three factors hold the process back. One is a lack of financial education: many people do not know how to switch banks or whom to choose, and they do not trust unfamiliar institutions. Another is product lock-in, such as loans tied to current accounts through interest discounts. Losing those discounts can cost far more than any savings from switching accounts. The third factor is service differentiation: not every bank offers the same investment products or digital solutions, and customers often stick with providers that meet their specific needs.
BBJ: Does it matter whether consolidation moves toward state-owned, domestic private, or foreign-owned banks, and how does that affect risk-taking and pricing?
BH: It should not matter. The same laws apply to all players.
BBJ: Finally, what would define “success” after 12 to 24 months? Which indicators would need to improve to justify consolidation professionally?
BH: Banks are not charities; they are businesses. Consolidation never happens for customers’ benefit but as a shareholder decision to buy, sell, enter, or exit a market. In mergers, only shareholder interests are considered, not those of customers. Rising profits and share prices are what prove whether an acquisition or sale made sense.
This article was first published in the Budapest Business Journal print issue of March 13, 2026.