Hungarian media group fueled with central bank cash

BUDAPEST (Reuters) - Shortly after National Bank of Hungary (NBH) Governor Gyorgy Matolcsy took his post three years ago, a group of businessmen launched an online media group that has grown rapidly with the help of the central bank.

Hungarian Prime Minister Viktor Orban and central bank Governor Gyorgy Matolcsy leave after a joint news conference in Budapest, December 18, 2014. REUTERS/Bernadett Szabo/File Photo

The company, New Wave, has received central bank grants totaling $2 million and a loan from a lender under the control of the central bank, according to NBH and company records.

New Wave also received a bigger slice of money from a central bank advertising campaign than any of its online rivals, in the period covered by published NBH data.

None of this funding violated any regulations or broke any laws, according to the central bank. It has nonetheless prompted some Hungarian media outlets and opposition politicians to allege New Wave received preferential treatment because it is owned by businessmen with close ties to Matolcsy and his family. Matolcsy and New Wave deny these allegations.

New Wave said in a statement to media outlets: “It is completely incorrect to assume that support from the National Bank of Hungary’s foundations transferred to these companies had anything to do with family ties.”

New Wave launched news website in late 2013 and bought web portal from Magyar Telekom for $15 million in January this year to become one of Hungary’s biggest online news groups.

Balazs Weyer, Origo editor until 2011 and chair of Hungary’s Editors’ Forum, said that in his experience of the media industry, the speed of the New Wave group’s expansion was “highly unrealistic” under normal business circumstances.

“A mid-size media company acquiring the market-leading brand (Origo) is unimaginable outside the zone of power,” he said.

VS, the news website of New Wave, has been the only major news outlet to benefit from grants handed out by the central bank through six foundations, according to a list published by the foundations.

Matolcsy set up the foundations in 2014 and endowed them with money from the NBH’s operating surplus in 2013 and 2014. He said their aim was to promote financial education.

VS received $2 million of grants last year to produce a series of articles on subjects that the NBH said were important but neglected in the local press. VS produced the series, sending reporters to produce about 10 video reports in places where Hungarian outlets rarely go, including Kenya and California.

Only a handful of other news companies received grants, but much smaller ones. The next biggest media recipients were two small news stations, Echo TV and Business Radio, which received grants worth about $25,000 and $7,000 respectively for programming.

Hundreds of companies and individuals in other sectors received money - grants or contracts - from the foundations. The total spending on grants, and the selection process involved, was unclear.

The central bank did not directly address Reuters questions about the grant to New Wave, instead referring to Matolcsy’s comments to daily newspaper Magyar Nemzet on May 6.

“The foundations do not examine what owners stand behind the supported projects,” Matolcsy said. “(VS) submitted a modern, excellent program that fits the foundations’ philosophy perfectly, so we supported it.”

Matolcsy is a close ally of Prime Minister Viktor Orban, who described him as his “right-hand man” when he served as economy minister in 2010-2013 and nominated him for the NBH job.

Orban has enjoyed strong support in print and broadcast news, with most leading outlets either swinging behind his Fidesz party or largely refraining from criticism during the 2014 election. But online outlets have been more critical.

Fidesz has sought to increase its influence in online media for several years, according to sources with knowledge of the government’s communication strategy.

“New Wave is an important new player among media groups close to Fidesz, one that strengthens the party’s influence in the online sphere, where it had less clout than in the traditional press,” said media analyst Gabor Polyak of the Mertek Institute think-tank in Budapest.

Orban’s government denies infringing on media independence and says it meets EU standards on media freedom. A government spokesman declined to comment on central bank ties to New Wave or allegations of Fidesz influence.


Matolcsy’s cousin, Tamas Szemerey, played a central part in the launch of New Wave; his consultancy firm BanKonzult paid registration fees to state authorities on behalf of the media company when it was set up in 2013, the registration documents show.

Weeks later a Czech company called Idspisa bought a majority stake in New Wave through a subsidiary. Jan Nagy, Szemerey’s long-time business partner, is the only board member listed at Idspisa, according to company records. He is also listed as the “official representative” for the subsidiary, Bawaco.

New Wave’s other shareholder and its CEO is Istvan Szaraz, a close friend of Matolcsy’s son Adam and Szemerey’s son Bertalan, according to media reports and sources close to New Wave.

While no one is asserting that these deals have cross legal lines, the partners’ links to Matolcsy have led to some opposition politicians calling for him to resign, accusing him of nepotism. Matolcsy has dismissed such calls as political opportunism.

Reuters was unable to contact Nagy. Szemerey did not reply to repeated emails seeking comment about the central bank funding and allegations of preferential treatment. His son and Matolcsy’s son also could not be reached for comment.

Szaraz did not address Reuters questions on the NBH funding and allegations of preferential treatment, but said it was his idea to launch the media group, which started with a tourism site.

“Next came VS... we had to grow it to a sustainable level,” he said by email. “Economy of scale considerations led us to (acquisitions). We now want to secure our online portfolio the largest reach on the Hungarian market.”

The money given to VS, the news website, and others was made public last month when the constitutional court struck down a law to restrict financial scrutiny of the foundations.

The disclosure led to 12 VS journalists resigning in protest at the grant. Some said they quit because they had not been told about the grant and were disturbed by the NBH funding in light of Matolcsy’s links to New Wave. Others said they knew VS had received a grant but did not realize it was so big.

“Independent reporters find it ever more difficult to work for owners who have no government ties, independent of state financing,” said Andras Kosa, one of the journalists who quit.

However, media analyst Polyak said he had seen no signs of state influence in VS or Origo’s content. He said online readers demanded critical coverage and it was unlikely that any news site carrying propaganda could attract the readership “vital to ensure survival” in the long run.


New Wave’s news site VS received 56 million forints ($198,390) from the central bank in the last three months of 2014 for an NBH advertising campaign about its funding-for-lending program for businesses, according to data on the NBH website.

This was before New Wave’s acquisition of Origo, at a time when VS was not among the country’s big online media companies.

Origo was the second-biggest beneficiary of NBH advertising revenue, receiving 46 million forints in the final quarter of 2014, while other web outlets each received less than 10 million.

The central bank and New Wave did not respond to Reuters questions about the advertising campaign spend.

In January New Wave received a loan from MKB Bank which sources close to the media group said was to help fund the $15 million Origo acquisition.

At the time, MKB was under the control of the central bank, which was restructuring the loss-making lender after the state stepped in to buy it from Germany’s Bayern LB.

The loan agreement is documented in New Wave’s records, but not its size. Sources close to the company said it was several times bigger than its annual revenue, which was almost $1 million in 2014 - the latest year on record.

The central bank did not address questions about the loan. New Wave and MKB Bank declined to comment on it.

Reporting by Marton Dunai; Additional reporting by Jan Lopatka in Prague; Editing by Pravin Char