Executive Circular on Expectations Regarding the Use of Asset Management Fee Caps for Operational Purposes

VICE PRESIDENT RESPONSIBLE FOR THE SUPERVISION OF FINANCIAL INSTITUTIONS AND CONSUMER PROTECTION 422063-3/2026 Executive Circular regarding supervisory expectations for voluntary pension funds on the use of the asset management fee cap for operational purposes

Pursuant to Section 4(9) of Act CXXXIX of 2013 on the Hungarian National Bank (MNB), in the exercise of its supervisory functions over the financial intermediary system, and based on the authorization granted in Section 39(1)(a), the MNB performs, among other things, the supervision of organizations, persons, and activities subject to the Voluntary Mutual Insurance Funds Act (Act XCVI of 1993) (hereinafter: "VPF Act").

A key task of the MNB is to maintain the stability and enhance the resilience of the financial intermediary system, as well as to protect the interests of clients. In its supervisory activities, the MNB pays particular attention to the consistent compliance with statutory provisions and the enforcement of the principles and considerations set forth therein.

Section 49(3a) of the VPF Act allows that if a voluntary pension fund does not reach the limit established for the magnitude of asset management costs under Sections 49(2) and (3) of the VPF Act in the amount paid or the cost accounted for, the fund may credit the operational reserve with the difference, up to the amount of the difference, on a quarterly or annual basis. The frequency of the credit is specified in the fund's articles of association.

The purpose of this circular is to present the MNB's position, expectations, and recommendations regarding the application of Section 49(3a) of the VPF Act, thereby promoting prudent institutional operation, taking into account the experience of ongoing consultations with professional organizations of the funds. In light of the above, the MNB formulates the following expectations and recommendations for voluntary pension funds (Funds):

• The MNB recommends that the Fund specify in its regulations regarding the formation of reserves the value date of the deduction under Section 49(3a) of the VPF Act, which supports a transparent, clear, and unambiguous calculation of the distribution of the deducted amount to fund members, as well as the verification of the correctness of the calculation.
• To ensure the transparent operation of the Fund, the MNB expects that the decision regarding the magnitude of the credit from the coverage reserve to the operational reserve precede the value date of the credit.
• In cases where investment fund managers performing asset management for the fund place investment fund shares of their self-managed investment funds in the fund's portfolios, to avoid double charging, it is expected that the investment fund manager performing asset management for the fund does not charge both an asset management fee and a fund management fee simultaneously for the self-managed investment fund shares placed in the fund's portfolio. Therefore, the asset management fee accounted for by the asset manager may remain well below the limit specified in Section 49(2) of the VPF Act relative to the average size of the assets transferred for management; consequently, it is expected that when determining the portion deductible for operations, the Fund takes into account the costs (indirect costs) of the self-managed investment funds of the investment fund manager performing asset management placed in the fund's portfolio.
• The deduction for operations must be taken into account in the calculation of net return. The MNB expects that, in periods affected by negative investment results, considering the interests of the members, the Fund should refrain from applying the credit of the unused portion of the maximum asset management fee to the operational reserve.
• In the case of a Fund operating a bookkeeping system based on settlement units, the deduction from the coverage reserve to the operational reserve reduces the price of the settlement unit, rather than the number of settlement units.
• The deduction from the coverage reserve to the operational reserve must be taken into account in the calculation of the Fund's total cost ratio (Fund TCR).
• It is justified that the difference specified in Section 49(3a) of the VPF Act be accounted for in the same manner as the asset management fee and appear among other expenditures related to investment activities. Based on Section 49(3a) of the VPF Act, the amount deducted and credited to the operational reserve for voluntary pension funds must be reported in the quarterly report in 2026 in the table "71OA1 Fund revenues and other credited revenues" on line "71OA1108 Other revenues," and in the table "71OA2 Fund expenditures" on line "71OA210307 Other expenditures related to investment activities."

The MNB draws the Fund's attention to the fact that, in the interest of cost-effectiveness and maintaining a competitive advantage against substitute products, the Fund should strive to ensure that the deduction from the coverage reserve to the operational reserve does not unduly increase the fee burden ratio and the TCR value.

The MNB expects that the Fund should strive and take necessary measures to ensure that the amount deducted under Section 49(3a) of the VPF Act facilitates the growth of the number of members and member contributions, and serves the development and improvement of service enhancements, digitalization, and customer service solutions that increase the value of the Fund's services, support member satisfaction, are capable of attracting younger demographics, and at the same time ensure the Fund's long-term sustainable operation.

The MNB expects that the Fund implement the deduction provided for in Section 49(3a) of the VPF Act in accordance with the guidelines formulated in this circular. The MNB expects the Fund's supervisory board and internal auditor to include in their annual work plan the examination of the implementation of the recommendations contained in this circular, should the Fund apply the aforementioned deduction.

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This executive circular is a supervisory regulatory instrument that does not have binding force on supervised institutions. The content of the executive circular issued by the MNB expresses the requirements imposed by laws, principles and methods recommended for application based on the MNB's law enforcement practice, as well as market standards and customs.

The MNB sends this executive circular directly to the Fund and also publishes it on its website.

In its examinations, the MNB will pay particular attention to compliance with the expectations formulated in this executive circular.

Thank you for your kind cooperation.

Budapest, 2026.

Dr. Levente Sipos-Tompa
Vice President responsible for the supervision of financial institutions and consumer protection of the Hungarian National Bank

VICE PRESIDENT RESPONSIBLE FOR THE SUPERVISION OF FINANCIAL INSTITUTIONS AND CONSUMER PROTECTION [<<szollosian>>]