Ethical issues within the banking system are addressed by the Ethics Committee, set up in 1996. The Association's Code of Ethics, adopted by the Association's General Meeting in 1999, establishes the standards of ethical conduct for member banks in their dealings with each other.

(As adopted by the Board, March 26, 1999)

HUNGARIAN BANKING ASSOCIATION CODE OF ETHICS
(Hereinafter, Hungarian Banking Association: the Association; Code of Ethics: Code)

I
Objectives

1. The primary objective of this Code is to establish and to ensure compliance with ethical standards of practice in banking.

2. An objective of this Code is to determine the procedures, tasks and actions to be instituted by the Association's Ethics Committee (hereinafter, and where appropriate: the Committee) in cases where there has been a breach of ethical norms.

3. The Association's objective in integrating this Code into its Rules is to ensure that member banks, in their business management, in their dealings with each other and in their provision of services, conduct themselves in a fair and ethical manner, mindful of the interests of the customer, and thus to ensure that members strengthen public confidence in banks and promote cooperation within the banking community.

4. A further objective of this code is to establish an ethical framework for fair competition which duly respects the legitimate and fair profit interests of member banks.

II
Effect of the Code

1. This Code shall apply to, and its provisions shall be binding on, members of the Association. (Hereinafter, where appropriate: member banks, banks).

2. For the purposes of the Code, the acts of the senior officers, employees and representatives of member banks shall be treated as the conduct of the banks.

3. The material effect of the Code shall extend to conduct related to the provision of financial and investment services, supplementary financial and investment services and any and all other business conducted by member banks.

III
Basic Principles

1. Members of the Association shall act in the spirit of mutual cooperation, and in compliance with the provisions of the law and with standards of professional conduct.

2. Members of the Association shall follow high standards of ethics in their dealings with each other, with customers, competitors and other economic actors; they shall refrain from any breach of ethics and shall provide for the conditions needed to enforce the principles of this Code within their own organisations.

3. Members of the Hungarian Banking Association shall be entitled to seek a ruling from the Ethics Committee should negotiations between themselves fail to resolve disputes arising in connection with the general banking conduct stipulated in Section 4, subsection (2) of the Rules of the Hungarian Banking Association.

4. Members of the Association shall be entitled to request action by the Ethics Committee in cases where unethical behaviour, detrimental to the interests of member banks, and committed by a party not belonging to the Association, and thus not subject to this Code, is observed.

5. The Ethics Committee may institute a procedure, even when there exist legal norms, sanctions or provisions whereby rights may be enforced in respect of the case in question, or when the case in question has been brought before a court or any other authority, or when the case has been the subject of a ruling by a court or any authority.

6. Ethically reprehensible behaviour (breach of ethics) shall be any act so designated by the Ethics Committee, based on the provisions and basic principles of this Code.

IV
Violation of the Code; Breaches of Ethics

1. Ethical banking practice is, in particular, a business activity or any other act, statement or approach that

- strengthens customer confidence in the banking sector as a whole;
- promotes and strengthens the public view that banks and bank staffs
provide high-quality and customer-focused services;
- encourages and promotes cooperation between member banks;
- helps to safeguard fair competition in the market;
- promotes mutual respect within the banking community;

and

- does not violate the provisions of this Code.

2. A breach of this Code shall be any conduct which may be morally construed, in the broadest sense of the word, as a violation of the laws regulating banks as business organisations and as financial institutions, the laws on fair and free competition, the laws on business advertising, the ethical standards and practice common to and expected of banks in Hungary, and the internationally established professional practice and good banking practices that may be deemed as desirable in Hungary.

3. The most important ethical expectations related to banks under this Code shall be as follows:

a/ In their mutual relations

- Banks shall comply with fair competition laws in their business policies. Banks shall not obtain or use business secrets in any unfair way, and shall not disclose business secrets to third parties, or make business secrets public without the permission of the other party concerned.

- In their employment policies, banks shall make sure not to injure the operations of a competitor when hiring an employee of a competitor. A particularly serious breach of ethics would take place if a bank seeks to hire an employee of a competitor with the intention of obtaining business secrets.

- A bank shall not try to acquire customers from another bank by calling upon them to terminate their contracts with the other bank.

- A facility introduced by a bank under a special name and under special conditions shall not be introduced by another bank under the same name and conditions.

- In particular, senior officers or other employees authorised to make official statements on behalf of their bank shall not make any public statements concerning another bank or the activities, intentions or capabilities thereof, that might give rise to any negative conclusions regarding the other bank's situation or objectives.


b/ In customer relations

- Banks shall not engage in any coordinated action or arrangement with any other bank or organisation aimed at fixing service fees, dividing the scope of activities or excluding, without any legitimate reason, certain customers from certain services.

- Banks shall not misuse their dominant positions when providing services. It shall be considered a misuse of dominant position when a bank enforces unreasonable and unilateral advantages in its contractual relations, including in its general business terms and conditions, or when it forces the customer to accept disadvantageous conditions or refuses to enter into a contract without legitimate reason.


- In executing contracts, banks shall provide full information to the customer, draw attention to the risks involved, give the customer due notice before amending a contract and handle customer complaints with the utmost care, including an objective investigation of the claim and not concealing personal error on the part of the bank's staff.

- Banks shall attend to it and shall regularly check that their employees

- consider attention, discretion, intelligent tone, tactfulness, patience and the provision of professional information as an intrinsic part of their job;

- behave in the manner appropriate to a bank employee at the workplace and elsewhere;

- do not seek or accept any benefits from customers.

V
The Ethics Committee of the Hungarian Banking Association

1. The Ethics Committee (hereinafter, where appropriate: the Committee) is the forum for the reconciliation and settlement of any disputes of ethical nature, and in particular, those related to general banking moral as stipulated in Section 4, subsection (2) of the Rules of the Hungarian Banking Association.

2. The primary objective of the Ethics Committee, in accordance with this Code, is to promote and strengthen customer confidence; promote fair competitor conduct in the bank's business relations and dealings with each other, and help settle any related disputes internally within the Association.

3. The most important task of the Ethics Committee is through its rulings to orient member banks in their complying with relevant laws and regulations, and to follow the Hungarian and international ethical standards of competitive and customer-friendly banking. Within this, through its rulings on advertising, the Committee's task is to promote the provision of reliable information to customers and to the general public. An important task of the Committee is to help develop fair competition conduct and ethics.

4. The tasks of setting up the Committee, establishing its rules of operation as stipulated in this Code, electing its members and fixing their honorariums shall be within the competence of the Board, the supreme body of the Hungarian Banking Association, where all member banks are represented.

5. The Ethics Committee shall consist of three members, elected by the Board triennially, in accordance with the general provisions of the Rules of the Hungarian Banking Association. The Chairman of the Ethics Committee shall be elected by the members of the Committee from among themselves.

6. Those elected to membership of the Committee may be any person in good standing within the profession who has no employment relations or any other legal relation in which work for remuneration is engaged in for, and is not a senior officer or member of the supervisory board of, any of the Association's member banks.

7. The Committee's detailed rules and procedures shall be set by the Committee in accordance with the provisions and basic principles of this Code.

VI
Procedures and Rulings of the Ethics Committee

1. An Ethics Committee procedure (hereinafter: ethics procedure) may be instituted upon the request of a member bank, or a customer of a member bank, or the Association's Presidium.

2. An ethics procedure upon the request of a customer shall only be instituted if the case could offer general conclusions. Consequently, the Ethics Committee shall only institute a procedure and adopt a ruling in those individual cases between a bank and a customer where the ruling could also serve as a general directive. Otherwise the request shall be referred as an individual complaint to the competent organ, or returned to the complainant by naming the organ the complainant may turn to.

3. The Ethics Committee shall decide on disputes brought by member banks against each other, provided such disputes relate to fair competition or other ethical standards of conduct. Otherwise the Ethics Committee may turn the case down on the grounds of having no jurisdiction.

4. An ethics procedure may be requested by member banks by means of a written petition giving the reason for such request. The Ethics Committee may, at its discretion, ask for the complementing of the request.

5. The Ethics Committee will decide within its own competence on accepting the request and instituting a procedure or on rejecting the claim. If a procedure is instituted, then this decision phase shall be reckoned in the deadline stipulated in Clause 7 hereof. The deadline for rejections shall be 30 days. Rejections shall be communicated in a written and reasoned form.

6. When instituting a procedure, the Ethics Committee, in order to form an opinion, shall ask for the verbal and written position of the banks affected on the legitimacy of the claim. If necessary, the Committee may convene a reconciliatory meeting which shall be attended by the parties affected.

7. Once a request for an ethics procedure is accepted, the procedure shall be instituted within the shortest possible time and shall be concluded at the latest within two months reckoned from the filing of the request. In special and complicated cases, this period may be extended by an additional two months. Decisions on extensions shall be forthwith communicated to the parties affected.

8. If required for the ruling, the Ethics Committee may decide to contact or hear other parties, apart from those affected, especially where professional ethics are inseparable from other implications of the case.


9. Should the complainant initiate procedures apart from the ethics procedure, or if, for any reason, a legal procedure is before a court or any other authority concerning the complaint, the Ethics Committee shall be entitled (but not bound) to suspend the ethics procedure until such external procedures are brought to a conclusion. In case of suspension, the period of suspension shall not be reckoned in the deadlines stipulated under Clause 7 hereof.


10. On completing the procedure, the Ethics Committee shall pronounce the case concluded, issue a written ruling establishing whether the behaviour in question can be qualified as a breach of ethics, and proceed with the measures stipulated under Clause 13.

11. The Ethics Committee shall adopt its rulings by a majority vote. To establish a quorum, the written or verbal statements of all three members of the Committee shall be required. This does not mean that all three members of the Committee have to be present in person to establish a Committee quorum. In justified cases, absent members of the Committee may vote by sending their written statements to the Committee. Otherwise, as a general rule, all members of the Committee shall be present at the meetings. The Committee may invite other parties to attend the meeting, apart from the parties affected. In the process of establishing a ruling, only members of the Committee may be present.

Under the voting procedure, the member in minority will be entitled to attach a separate statement to the ruling.

The Committee's meetings shall be convened and chaired by the Chairman of the Committee.

12. The Committee's rulings shall be given in a written and reasoned form and shall be sent to the parties within three banking days. The Ethics Committee's rulings shall be governed by the relevant laws and regulations, the common practice in Hungary and by the internationally established professional practice and good banking practices which the Ethics Committee may deem as applicable and desirable to be followed in Hungary.


13. The Committee's rulings may be

a/ public, if the Committee, with the consent of the Presidium and with due regard to all circumstances finds it so desirable. In such cases, the Committee shall also decide on the manner of such public disclosure;

b/ disclosed exclusively within the Association;

c/disclosed exclusively to the parties involved, in particular where a dispute is of no relevance to customers and the parties have been able to come to an agreement and jointly request the communication of the ruling in this manner.

14. The Committee shall, through the General Secretary of the Association, advise the Association's Presidium on its ruling prior to making such ruling known.

15. The ethics procedure is a single-stage procedure. However, should any party disagree with the final ruling, this party has the right, within three days, to request the annexing of its own statement to the ruling. The Committee shall annex the relevant statement when taking the measures stipulated under Clause 13.

16. Should a party not belonging to the Association engage in conduct that is ethically reprehensible and damaging the interests of the Association's member banks, the Ethics Committee shall, whether in the line of its duties or upon such announcement or request by any member bank, advise through the Association the body that is competent to rule in the case, giving the Committee's findings and position and requesting the taking of appropriate action.

17. In addition to adopting rulings under ethics procedures, the Ethics Committee may formulate recommendations. In such cases the procedures stipulated above may only be applied where appropriate; recommendations may only have general reference without naming any specific bank and their purpose shall be to highlight the desirable practice to be followed in specific cases.

18. The Ethics Committee shall also provide a forum for member banks to seek the Committee's rulings in disputes concerning general banking practice by submitting these to the Committee rather than having recourse to law. In such cases, the procedure to be followed shall be determined by the Committee case by case in joint agreement with the applicants. The procedure shall be concluded by a ruling. However, any such ruling shall not provide for measures regarding any public disclosure of the ruling.

19. Members of the Ethics Committee shall undertake in writing to keep, in accordance with the relevant laws and regulations, all bank and business secrets which they may have acquired knowledge of in the course of their activities, and shall not make any statements whatsoever prior to the conclusion of a case, whether verbal or written and regardless of whether or not such statements would violate any bank or business secret.

20. The personal and material expenses required for the operation of the Committee shall be provided for in the Association's budget.

VII
Closing Provisions

1. This Code is a public document and shall be publicly accessible at the official premises of the Association.

2. This Code shall come into force on the day of its adoption by the Board and its provisions shall be applicable from that date.

3. In consequence of the coming into force of this Code, the Association's Basic Principles laid out in the document "The Objective of Setting Up the Ethics Committee of the Hungarian Banking Association and its Basic Principles of Operation", adopted by the Board of the Hungarian Banking Association on March 29, 1996 shall become null and void. Nevertheless, cases now in process shall continue to be governed by the principles of that document.

Budapest, March 26, 1999

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