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
FINMA Approves Merger of Credit Suisse and UBS
The Swiss Financial Market Supervisory Authority (FINMA) has approved the takeover of Credit Suisse by UBS.
BOE Sets Out Its Thinking on Regulatory Capital and Climate Risks
The Bank of England (BOE) published a working paper that aims to understand the climate-related disclosures of UK financial institutions.
OSFI Finalizes on Climate Risk Guideline, Issues Other Updates
The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.
APRA Assesses Macro-Prudential Policy Settings, Issues Other Updates
The Australian Prudential Regulation Authority (APRA) published an information paper that assesses its macro-prudential policy settings aimed at promoting stability at a systemic level.
BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending
BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.
HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks
The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.
MFSA Sets Out Supervisory Priorities, Issues Reporting Updates
The Malta Financial Services Authority (MFSA) outlined its supervisory priorities for 2023
German Regulators Issue Multiple Reporting Updates for Banks
Deutsche Bundesbank published the nationally deactivated validation rules for the German Commercial Code (HGB) users on the taxonomy 3.2, which became valid from December 31, 2022
BCBS Report Examines Impact of Basel III Framework for Banks
The Basel Committee on Banking Supervision (BCBS) published results of the Basel III monitoring exercise based on the June 30, 2022 data.
PRA Consults on Prudential Rules for "Simpler-Regime" Firms
Among the recent regulatory updates from UK authorities, a key development is the first-phase consultation, from the Prudential Regulation Authority (PRA), on simplifications to the prudential framework that would apply to the simpler-regime firms.
