Attorneys’ escrows held by Sberbank may be released

At the initiative of the Ministry of Justice, the Hungarian National Bank and the Hungarian Bar Association, the Government adopted a Government Decree in April 2022 regulating in detail the payment of lawyers' deposits at financial institutions in the event of liquidation and winding-up proceedings. The Government Decree provides that in the event of the winding-up and liquidation of a financial institution, the provisions of the Bankruptcy Act, the Company Registration Act, the Act on Credit Institutions and Financial Undertakings and the Investment Firm Act shall apply with the additions and derogations included in the Government Decree.

As a background, in a letter dated 2 March 2022, the President of the Hungarian Bar Association turned to the President of the National Bank of Hungary regarding the deposits placed in attorneys’ escrow accounts held at Sberbank Hungary Zrt. As already known, that the Hungarian National Bank prohibited Sberbank from paying out amounts exceeding HUF 7 million per client for 30 days from 2 March 2022, revoked the business activity licence of the bank and initiated the winding-up of the company before the court. In his letter, the President of the Hungarian Bar Association recorded that as a consequence, the attorneys are unable to meet their obligations arising from the escrow agreements, and therefore requested the President of the Hungarian National Bank to ensure that the aforementioned restrictions do not apply to the transactions to be carried out on the escrow bank accounts of the attorneys.

As a result, under the Government Decree, the administrator or the liquidator must arrange for the payment or release of assets which are not part of the assets subject to winding-up or liquidation, including the amounts placed at the account relating to a notary, executor, attorney escrow or custody activity administered by the financial institution within 30 days of the order of winding-up or liquidation. The amount must be issued and paid if the purpose of the funds can be clearly established from the contract concluded between the financial institution and the customer. The administrator or liquidator must initiate the transfer of deposit portfolio and other repayable funds, as well as the transfer of the portfolio of payment services framework agreement at the Hungarian National Bank within 120 days from the order of winding-up or liquidation. The provisions of the Government Decree entered into force on 15 April 2022.