The CNB Board decided to increase the countercyclical capital buffer (CCyB) rate to 1%, with effect from July 01, 2022. The Board also decided to reduce the frequency of the two-week liquidity-providing repo operations for credit institutions to once a week, with effect from May 28, 2021, and to reintroduce the previously applied interest rate mark-up of 0.1 pp. However, a decision was made to keep the recommended loan-to-value (LTV) limit unchanged at 90%, with the option of applying a 5% exemption.
At this time, CNB does not deem it immediately necessary to set debt-to-income (DTI) and debt service-to-income (DSTI) limits or to tighten the other parameters of the existing recommendation on the management of risks associated with the provision of mortgage loans issued in April 2020. CNB regards the high and increasing share of loans with a DTI ratio of over 8% and a DSTI ratio of over 40% as a potential source of systemic risk. Therefore, lenders are advised to ensure that such loans are only provided to applicants that are highly likely to repay without problems. CNB would have to react using macro-prudential policy tools to any further easing of credit standards and taking on of additional risks. During the meeting, the CNB Board also discussed the Spring Financial Stability Report, noting that a significant source of systemic risk in the domestic economy is the repeated reversal of the spiral between debt financing for the purchase of residential real estate and its rapidly rising prices. Despite the pandemic, residential property prices in the Czech Republic have risen and are now about 70% higher than they were at their lowest point at the end of 2013, thus making housing less affordable. This report is the foundation for the decisions regarding macro-prudential policy instruments, which above all include the countercyclical capital buffer (CCyB) of banks and limits on mortgage lending indicators.
Keywords: Europe, Czech Republic, Banking, CCyB, Credit Risk, Macro-Prudential Policy, Systemic Risk, Regulatory Capital, Basel, Mortgage Lending, DSTI, DTI, LTV, Financial Stability Report, CNB
Previous ArticleFDIC Tech Sprint Aims to Explore Technologies to Reach Unbanked
The Prudential Regulation Authority (PRA) published the final policy statement PS21/21 on the leverage ratio framework in the UK. PS21/21, which sets out the final policy of both the Financial Policy Committee (FPC) and PRA
The Consumer Financial Protection Bureau (CFPB) proposed to amend Regulation B to implement changes to the Equal Credit Opportunity Act (ECOA) under Section 1071 of the Dodd-Frank Act.
The Prudential Regulation Authority (PRA) decided to maintain, at the 2019 levels, the buffer rates for the Other Systemically Important Institutions (O-SII) for another year, with no new rates to be set until December 2023.
The Financial Stability Board (FSB) published a progress report on implementation of its high-level recommendations for the regulation, supervision, and oversight of global stablecoin arrangements.
In a letter to the authorized deposit taking institutions, the Australian Prudential Regulation Authority (APRA) announced an increase in the minimum interest rate buffer it expects banks to use when assessing the serviceability of home loan applications.
The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) are consulting on the preliminary guidance that clarifies that stablecoin arrangements should observe international standards for payment, clearing, and settlement systems.
The European Banking Authority (EBA) and the European Insurance and Occupational Pensions Authority (EIOPA) have set out their respective work priorities for 2022.
The Malta Financial Services Authority (MFSA) updated the guidelines on supervisory reporting requirements under the reporting framework 3.0, in addition to the reporting module on leverage under the common reporting (COREP) framework.
The European Commission (EC) published the Implementing Decision 2021/1753 on the equivalence of supervisory and regulatory requirements of certain third countries and territories for the purposes of the treatment of exposures, in accordance with the Capital Requirements Regulation or CRR (575/2013).
EC published the Implementing Regulation 2021/1751, which lays down implementing technical standards on uniform formats and templates for notification of determination of the impracticability of including contractual recognition of write-down and conversion powers.