February 24, 2015 / 8:46 AM / 5 years ago

UPDATE 2-Hungary suspends Buda-Cash brokerage, four small banks

* Brokerage can’t account for 100 bln forints - central bank

* Bank takes control of four small banks linked to Buda-Cash

* Buda-Cash spokeswoman declines immediate comment (Adds detail, comments from central bank)

By Gergely Szakacs

BUDAPEST, Feb 24 (Reuters) - Hungary’s central bank seized control of Buda-Cash and four small lenders with links to the brokerage on Tuesday saying the company could not account for about 100 billion forints ($371 million) of client cash.

The National Bank of Hungary, the country’s financial sector regulator, said it had filed a report and a criminal complaint with police. Buda-Cash clients’ access to securities and other assets has been suspended pending further investigation.

“There is strong suspicion that we have uncovered a series of wrongdoings spanning several decades,” National Bank of Hungary Deputy Governor Laszlo Windisch told a news conference.

A spokeswoman for Buda-Cash, which provides stock and currency trading services, declined immediate comment.

The Budapest-based brokerage was founded in 1995 and has grown into a major retail player with 11 branches. The client login page of its website carried a statement on Tuesday explaining that the central bank had suspended all services.

“There is a strong suspicion that it cannot account for very large amounts of clients’ money,” Windisch told the news conference, adding that an estimated 15,000 to 20,000 clients might be affected.

He said losses from the recent surge in the Swiss franc alone could exceed 10 billion forints.

The central bank’s investigation had unearthed securities trading “irregularities” at the four small lenders it also took control of on Tuesday, Windisch said.

The central bank said the lenders, part of the DRB Group, were linked to the brokerage through the owners of Buda-Cash.

Windisch said the four lenders accounted for 0.73 percent of the Hungarian banking sector based on assets and had about 120,000 depositors. He stressed that the suspected wrongdoings did not threaten the stability of the wider financial system.

“We suspect that the funds that the brokerage cannot account for could seriously affect the operation of these four banks,” he said.

Windisch said, if necessary, the National Deposit Insurance Fund would compensate depositors at the banks for up to 100,000 euros, while clients of Buda-Cash could get up to 20,000 euros, if needed.

He said the insurance funds could get loans from the central bank, if necessary.

$1 = 269.82 forints Reporting by Gergely Szakacs and Sandor Peto; Editing by David Goodman and David Clarke

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