Dr Virág Blazsek writes vital chapter on Bank Resolution in Hungary

Dr Blazsek's research was published in the Bank of Italy's legal research paper series on 9 June 2025.

The Bank of Italy, one of the most prestigious central banks of the euro area, has been publishing its research paper series (Quaderni di Ricerca Giuridica) since 2003. The research papers are focused on issues of financial regulation, financial stability, banking supervision, and monetary law. Dr Virág Blazsek contributed to the research paper with a chapter on ‘Bank Resolution in Hungary’ (pp. 307-333).

This extensive study examines how EU member states have implemented the Bank Recovery and Resolution Directive's requirements on the institutional design of national resolution authorities. The comparative study concludes that the separation of functions (supervision versus resolution) is more often achieved functionally rather than via separate entities.

Research paper series

The research papers have an indirect but significant impact on EU law and broader European legal and economic policy discussions. These research papers provide in-depth legal analysis that may inform or critique EU legislation, ECB decisions, or European Court of Justice (ECJ) rulings.

The research paper series is peer-respected and publicly accessible, often cited in legal journals, conferences, and EU institutional publications. EU legal scholars and drafters may reference these works when developing or refining directives, regulations, or policy reports.

Bank resolution in Hungary

The chapter Dr Blazsek authored informs scholars and regulators as to the institutional framework of bank resolution in Hungary. The Central Bank of Hungary fulfills central banking as well as both 'competent authority' (financial supervisory authority) and 'resolution authority' functions.

The advantage of this type of organizational structure is that in case of a liquidity crisis, when the central bank needs to act as lender-of-last-resort, as it is the supervisory authority too, it has all the information concerning the financial situation of the financially distressed bank.

Hungary has a separate deposit insurance fund (NDIF) and an Investor Protection Fund. Both schemes aim to strengthen investor confidence through providing ex ante, financial sector-funded guarantee of deposits and investments up to a specified limit. In line with EU law, the funds of the NDIF and the Investor Protection Fund may be used for bank resolution purposes within strict limits. Hungary's participation in the EU's system-wide insurance scheme against future bank failures in combination with the clear and ample authorisation of its government and central bank for crisis management provides a relatively strong safety net for future financial instabilities.

Looking forward

The Bank of Italy’s research paper is particularly timely, as on 25 June 2025, the Council and Parliament of the European Union reached an agreement to strengthen the EU financial crisis management framework, which was set up in line with the G20 Financial Stability Board’s policy recommendations following the 2008 Global Financial Crisis. The upcoming formal adoption of the reforms is a step in the right direction.

However, Dr Blazsek argues that bank resolution, i.e., bank-specific insolvency proceedings, is only suitable outside of financial crisis situations, as it has traditionally been used for isolated bank failures with no systemic impact – cases which are rare. In situations of financial panic or fear of panic, like in 2016-17 or 2023, bank resolution is ineffective, as its underlying aim is to protect taxpayers and ensure overall fairness, rather than to achieve the core objective of crisis management: restoring trust promptly and providing prompt and adequate liquidity support. The planned changes to the EU financial crisis management framework acknowledge these shortcomings of the current legal framework and are therefore reasonable.It is Dr Blazsek's hope that this research will contribute to more robust crisis preparedness frameworks. The editors (Raffaele D'Ambrosio of the Bank of Italy and Diane Fromage of the University of Salzburg) are organising a conference on this research paper for December 2025.

Dr Blazsek is the Deputy Director for the Centre for Business Law and Practice, and can be found on LinkedIn or at her personal website.