According to the decision, the brokerage will have to pay District 10 HUF 2.8 billion for its lost deposit and HUF 600 million in lost interest payments within 15 days. Owned by Hungary’s second largest retail bank K&H Bank Rt., the brokerage suffered HUF 20 billion losses from the dealings of its broker Attila Kulcsár last year. Originally, the brokerage denied paying District 10 compensation because it claimed that the municipality was partially responsible for the damages.

The arbitration court, however, ruled that District 10 was not involved in Kulcsár’s frauds. The court said the bank’s files prove that Kulcsár made a total of 578 transactions using the money District 10 deposited at the brokerage.

K&H now has 60 days to appeal the ruling at the Budapest Court, but the appeal will not save it from paying the compensation.

In recent days, the State Supervision of Financial Institutions (PSZÁF) – upon a proposal by the National Bank of Hungary (MNB) – fined K&H Bank HUF 5.4 million for violating rules of informing clients, payment deadlines and supplying data to the national bank. In November 2004 PSZÁF already fined K&H HUF 5 million. The bank, however, was severely hit by another resolution of the supervision that ordered the bank to keep 10% capital reserve instead of the usual 8%, due to the bank’s high operating risks.