CNB Examines Financial Sector Stability, Increases CCyB Rate to 1%
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.
Related Links
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
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
FDIC Tech Sprint Aims to Explore Technologies to Reach UnbankedRelated Articles
OSFI Discusses Benchmark Rate Transition, Sets Out Work Priorities
The Office of the Superintendent of Financial Institutions (OSFI) published the strategic plan for 2022-2025 and the departmental plan for 2022-23.
EBA Proposes Standards to Support Secondary NPL Markets
The European Banking Authority (EBA) is consulting, until August 31, 2022, on the draft implementing technical standards specifying requirements for the information that sellers of non-performing loans (NPLs) shall provide to prospective buyers.
EU Confirms Agreement on Rules on Cybersecurity and Banking Resolution
The European Council and the Parliament reached an agreement on the revised Directive on security of network and information systems (NIS2 Directive).
EBA Issues Standards for Crowdfunding Service Providers Under ECSPR
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying information that crowdfunding service providers shall provide to investors on the calculation of credit scores and prices of crowdfunding offers.
EU Confirms Agreement on Rules on Cybersecurity and Banking Resolution
The European Securities and Markets Authority (ESMA) published a paper that examines the systemic risk posed by increasing use of cloud services, along with the potential policy options to mitigate this risk.
EC Consults on PSD2 and Open Finance; EU Reaches Agreement on DORA
The European Commission (EC) published a public consultation on the review of revised payment services directive (PSD2) and open finance.
EC Mandates ESAs to Propose Amendments to SFDR Technical Standards
The European Commission (EC) has issued two letters mandating the European Supervisory Authorities (ESAs) to jointly propose amendments to the regulatory technical standards under Sustainable Finance Disclosure Regulation or SFDR.
EBA Examines Supervisory Practices, Issues Deposits Reporting Template
The European Banking Authority (EBA) published its annual report on convergence of supervisory practices for 2021. Additionally, following a request from the European Commission (EC),
SNB Updates NSFR Forms and FINMA Consults on Operational Risk Circular
The Swiss National Bank (SNB) published Version 1.2 of the reporting forms (NSFR_G and NSFR_P) on the net stable funding ratio (NSFR) of banks, along with the associated documentation.
US Agency Publications Address Basel, Reporting, and CECL Developments
The Farm Credit Administration published, in the Federal Register, the final rule on implementation of the Current Expected Credit Losses (CECL) methodology for allowances
