Banking was nationalized in 1948, when the National Bank of Hungary was installed as the bank of issue, with a monopoly on credit and foreign exchange operations.
Following the 1987 reform of the banking system, the National Bank retained its central position as a bank of issue and its foreign exchange monopoly, but its credit functions were transferred to commercial banks. Three new commercial banks were established: the Hungarian Credit Bank, the Commercial and Credit Bank, and the Budapest Bank. Two other commercial banks, both founded in the 1950s, are the Hungarian Foreign Trade Bank and the General Banking and Trust Co. These six banks serve the financial needs of enterprises and government operations. The main bank for the general public is the National Savings Bank; in 1987 there were also 262 savings cooperatives. The Central Corporation of Banking Companies handles state property, performs international property transactions for individuals, and deals with the liquidation of bankrupt companies. The State Development Institution manages and controls development projects. In 1987 there were also three banks with foreign participation: the Central European International Bank (66% of shares held by six foreign companies), Citibank Budapest (80% owned by Citibank New York), and Unibank (45% owned by three foreign companies). In 1991 there were 10 government owned commercial banks, 16 joint-stock owned commercial banks, 5 government owned specialized financial institutions, one offshore bank and 260 savings cooperatives. By 1997, Hungary had over 30 commercial banks, about 10 specialized financial institutions, and 260 savings cooperatives. By 1998, around 75% of all banks had been privatized and 70% of these shares had foreign owners. Upon joining the OECD in 1996, Hungary ceased its ban on the establishment of foreign branches, effective January 1998. The International Monetary Fund reports that in 2001, currency and demand deposits—an aggregate commonly known as M1—were equal to $9.7 billion. In that same year, M2—an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual funds—was $24.3 billion. The discount rate, the interest rate at which the central bank lends to financial institutions in the short term, was 9.8%.
In Budapest, an authentic commodity and stock exchange functioned from 1867 until 1948, when it was closed down as the country transformed into a centralized socialist economy. The reorganization of the Hungarian securities market, after a pause of some 40 years, started at the beginning of the 1980s. The Exchange was founded eventually on 21 June 1990. The bull market on the Budapest Stock Exchange (BUX) continued during the final quarter of 1996. The BUX index closed 1996 at 4,125, up 170% compared with end-1995. The increase was the second strongest in the world, following the Venezuela market. By 7 February 1997, the BUX index had reached 5,657. By mid-2000, the index stood at over 8,800, but as of mid-2003, it had dropped to just over 8,000 amid the global recession.