JEL Code: E44\n\nThis case study provides a brief description of the modernization and the main development stages of the Hungarian banking system and its role in the economy during the time of the crisis from 2008. The focus is on the factors mainly determined by the regulatory environment such as the entry of banks to the market, the ownership structure of the sector and competition in banking.\nThe weakness of the price competition which is less measurable and not price based has noticeably been increasing since the last decade. This race began with the expansion of sales channels and marketing which is based on cost competition.\nThe Hungarian banking system was less directly affected by the credit crunch. The vast majority of Hungarian banks were owned by foreign banks mostly in the euro zone, which assigned them responsibility for replacing capital.\nThe Hungarian National Bank provided liquidity instruments to commercial banks in order to overcome the shortage of liquidity and restore the lending capacity of banks.\nThe objective of the ‘bank rescue’ package was to improve the stability and capacity of the Hungarian creditor banks relying on the IMF loans; if necessary with guarantees and capital injection. The law basically opened up the possibility of state capital injection for Hungarian banks without dominant foreign owners.\nSince the Hungarian government also insisted on more tax reductions causing billion forints revenue loss (a flat-rate personal income tax, corporate tax credit extension), it needed other sources of income. The Government announced a patriotic economic policy including fight against multinational companies in order to protect the national capital. Distinction has been made between value-added work and the service sector.