ABSTRACT
Hungary's financial system has undergone significant changes since 1987, the year when the foundations of the two-tier banking system were laid. One of the key points in the financial regulatory changes in Hungary during the last two decades was the introduction of and changes to capital requirements. The first Hungarian provisions on capital requirements for credit institutions were motivated by the recommendations of Basel I. The provisions of the Financial Institution Act translated the recommendations of the Basel I into Hungarian law. The notion of capital requirements was introduced by Act LXIX of 1991 on Financial Institutions and the Activities of Financial Institutions in Hungary. Act LXIX of 1991 on Financial Institutions and Financial Activities included a passage that called for the decrease of the Hungarian state's share in the banking system. The Hungarian legislation defined the investment instruments, investment and auxiliary investment services firstly in the Securities Act, and in the Capital Market Act.
