Featured Product

    CNB Publishes Financial Stability Report for 2018–19

    June 11, 2019

    CNB published the financial stability report for 2018–19. The report discusses developments in the banking and non-banking financial sector. The report contains information on the overall risk assessment, the stress tests of individual segments of the financial sector, the macro-prudential instruments for risk mitigation, and the analysis of risks associated with regulatory developments. CNB discussed the report at it Board meeting on May 23, 2019. At the meeting, the Board decided to increase the countercyclical capital buffer (CCyB) rate to 2.0%, with effect from July 01, 2020.

    The decision on the CCyB rate reflects an increase in risks associated with economic developments in the upward phase of the financial cycle and a slight increase in signals of vulnerability of the domestic banking sector to a potential adverse change in conditions. Keeping in mind the reasonable dividend policies, banks have sufficient space for a prospective increase in the CCyB and the growth in their credit portfolios on the aggregate level. With regard to estimates of house price overvaluation, CNB regards the current loan-to-value (LTV) limits as upper bounds, although the bank does not deem it necessary to tighten the LTV limits.

    After the recommended debt-to-income (DTI) and debt-service-to-income (DSTI) limits entered into force in October 2018, the shares of loans in excess of the recommended levels of the two ratios started to head toward the 5% exemption. However, the adjustment process has not yet been completed and banks were non-compliant with the recommended limits overall in the fourth quarter of 2018. CNB expects banks to comply with the limits in the first half of this year. Despite a small reduction of the room for interest rates on mortgage loans to rise sharply, the Board decided to leave the recommended cap on the DSTI ratio at 45%. Meanwhile, CNB expects lenders to continue to be highly prudent in providing loans with DSTI ratios of between 40% and 45%, as the conclusions of its analyses and stress tests demonstrate that loans with DSTI ratios of over 40% can be regarded as highly risky.

    Overall, banks have strengthened their capital adequacy in the previous period and have high liquidity. Insurance companies maintained their capitalization and profitability despite the financial market developments that unfavorably affected the value of their assets and liabilities. Pension management companies and investment funds were adversely affected by changes in asset prices at the end of 2018, but this did not result in an outflow of clients or in systemically important losses. CNB will publish additional detailed analyses of risks to financial stability and information about the macro-prudential policy settings in December in its regular document "Risks to financial stability and their indicators – December 2019," which will be the underlying document for the autumn Board meeting on financial stability issues.

     

    Related Links

    Effective Date: July 01, 2020 (CCyB Rate)

    Keywords: Europe, Czech Republic, Banking, Insurance, Securities, Financial Stability, CCyB, Stress Testing, LTV, Mortgage Lending, Capital Adequacy, Macro-Prudential Policy, Credit Risk, CNB

    Featured Experts
    Related Articles
    News

    EBA Finalizes Remuneration Standards for Investment Firms in EU

    EBA finalized the two sets of draft regulatory technical standards on the identification of material risk-takers and on the classes of instruments used for remuneration under the Investment Firms Directive (IFD).

    January 21, 2021 WebPage Regulatory News
    News

    ECA Recommends Actions to Enhance Resolution Planning for Banks

    EC published, in the Official Journal of the European Union, a notification that the European Court of Auditors (ECA) has published a special report on resolution planning in the Single Resolution Mechanism.

    January 20, 2021 WebPage Regulatory News
    News

    BoE Publishes Key Elements of the 2021 Stress Testing for Banks in UK

    BoE published a scenario against which it will be stress testing banks in 2021, in addition to setting out the key elements of the 2021 stress test, guidance on the 2021 stress test, and the variable paths for the 2021 stress test.

    January 20, 2021 WebPage Regulatory News
    News

    PRA Proposes Rules on Identity Verification of Depositor Protection

    PRA published a consultation paper (CP3/21) proposes rules regarding the timing of identity verification required for eligibility of depositor protection under the Financial Services Compensation Scheme (FSCS).

    January 20, 2021 WebPage Regulatory News
    News

    FSB Publishes Work Program for 2021

    FSB published the work program for 2021, which reflects a strategic shift in priorities in the COVID-19 environment.

    January 20, 2021 WebPage Regulatory News
    News

    FCA Issues Update on Move to New Data Collection Platform

    FCA announced that 50% firms have started using the new data collection platform RegData, which is slated to replace the existing platform known Gabriel.

    January 20, 2021 WebPage Regulatory News
    News

    Bundesbank Publishes Derivation Rules for Reporting by Banks

    Bundesbank published Version 5.0 of the derivation rules for completeness check at the form level, with respect to the data quality of the European harmonized reporting system.

    January 19, 2021 WebPage Regulatory News
    News

    FED Revises Capital Planning and Stress Testing Requirements for Banks

    FED finalized a rule that updates capital planning requirements to reflect the new framework from 2019 that sorts large banks into categories, with requirements that are tailored to the risks of each category.

    January 19, 2021 WebPage Regulatory News
    News

    ECB Releases Results of Bank Lending Survey for Fourth Quarter of 2020

    ECB published results of the quarterly lending survey conducted on 143 banks in the euro area.

    January 19, 2021 WebPage Regulatory News
    News

    ESAs Publish Reporting Templates for Financial Conglomerates

    ESAs published the final draft implementing technical standards on reporting of intra-group transactions and risk concentration of financial conglomerates subject to the supplementary supervision in EU.

    January 18, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6484