CNB Assesses Financial Stability Risks, Maintains CCyB at 0.5%
CNB published a report assessing the soundness and stability risks of the financial sector in the country, based on the 2020 data available to date. On the basis of this analysis, the CNB Board decided to keep the countercyclical capital buffer (CCyB) rate for banks unchanged at 0.5%, in addition to keeping the loan-to-value (LTV) limit unchanged at 90%, with the option of applying a 5% volume exemption. However, if a much more adverse scenario materializes, CNB is ready to release the CCyB fully.
The report on financial stability assessment highlights that results of the macro stress test of banks show that the capital surplus level can be very important in maintaining banking sector stability in highly adverse economic conditions. The report also reveals that a renewed spiral between credit financing of residential property purchases and rapidly rising residential property prices is a significant source of systemic risk in the Czech economy. The continued strong growth in property prices in the Czech Republic caused the affordability of housing to deteriorate and led to a rise in house price overvaluation. CNB states that, in their mortgage lending, financial institutions mostly comply with the recommended limits on mortgage ratios or respect the CNB indication of high-risk levels. Therefore, the Board has decided to keep the LTV limit unchanged and does not deem it necessary to set limits on the other two mortgage ratios—that is, debt-to-income (DTI) and debt-service-to-income (DSTI)—or to tighten the other parameters of the risk management recommendation associated with the provision of mortgages. However, some players on the mortgage market have taken on higher-than-recommended credit risk, especially in the second quarter of 2020. CNB supervisors will focus on these lenders in the period ahead, assessing whether they have sufficient buffers to cover the higher risk.
Related Links
Keywords: Europe, Czech Republic, Banking, Financial Stability, CCyB, COVID-19, DSTI, Credit Risk, Macro-Prudential Policy, Mortgage Lending, Systemic Risk, Regulatory Capital, Basel, CNB
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
HKMA Consults on Capital Rules for Bank Equity Investments in FundsRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
