Multi-Country Review of Insolvency Frameworks & Procedures

Country/Locality Hungary
Overall project value (EUR)
Name of client
Host country’s subnational governments
Origin of funding
World Bank
Starting date 02/2010
Ending date 09/2010
Partner -
Detailed description of project
The objective of the project is to prepare an information guide that contains a detailed analysis of the legal, regulatory and institutional framework governing the insolvency of subnational entities in Hungary. The purpose of the guide is to provide detailed, practical information about the insolvency proceedings in Hungary. To this end, the guide will go beyond an examination of the legislation to include specific references to practical experiences surrounding insolvency of such entities.

The guide will focus on:
  • Macroeconomic and institutional context for the development of Law on Municipal Debt Adjustment (Law XXV) in 1996;
  • The implementation experience of the law since 1996;
  • Challenges emerged from the implementation and any debates and revisions (if any) to the law;
  • How the current financial crisis may impact the implementation and/or reform of the law going forward.
Furthermore, the guide will provide broader contextual information on the following aspects in Hungary:
  • Structure of subnational governments
  • Sources of subnational finances
  • Subnational borrowing framework: ex ante regulations
  • Subnational debt market
  • Subnational insolvency framework
Type of services provided
LGID tasks in the project included:
  1. Review relevant legislation pertaining to the borrowing, default and insolvency to develop a clear understanding of the practical treatment of such cases;
  2. Gather government and other available data on actual occurrences of subnational default and insolvency;
  3. Prepare an analysis of the foregoing information, focusing on its practical implications for existing and future lenders to such subnational entities;
  4. Provide a classification of the subnational entities in the country and decide which types to focus on
  5. Gather information on different types of debt, their respective treatment in insolvency, and draw implications
  6. Prepare and package the information in a user-friendly information guide