CNB Assesses Stability of Financial Sector, Sets CCyB at 2.5%
Post the periodic financial stability assessment, the Board of the Czech National Bank (CNB) decided to retain the countercyclical capital buffer (CCyB) rate at 2.5% and published the financial stability report. The report finds that the banking sector in the Czech Republic remains highly resilient and is sufficiently equipped with capital to absorb shocks even in the event of long-lasting economic difficulties and climate shocks. Additionally, CNB announced that the Government of Czech Republic has not yet set the date for the Eurozone entry of the Czech Republic. One of the few reasons for this decision is that the structure of the Czech economy continues to differ significantly from that of the Eurozone, which is anticipated to cause problems in the case of a unified monetary policy.
Post its financial stability assessment, the CNB Board decided to keep the upper limits of the loan-to-value (LTV), debt-to-income (DTI) and debt service-to-income (DSTI) indicators for mortgage loans at the level valid since April 01, 2022. The decision was based on an assessment of financial cycle development indicators, the vulnerability of the banking sector, and other factors that affect its resilience. The limit of the DTI indicator (the loan applicant's total debt expressed in multiples of his net annual income) will continue to be 8.5 (9.5 for applicants under 36). The limit of the DSTI indicator (the ratio between the total amount of the loan applicant's monthly debt repayments and his net monthly income) remains at 45% (50% for applicants under 36). The upper limit of the LTV indicator (the ratio of the loan to the value of the mortgaged property) will remain at 80% (90% for applicants under 36). Providers may continue to apply an exemption from meeting the limits to up to 5% of the volume of mortgage loans. The CNB Board also decided to keep the CCyB rate at 2.5%, which banks will be required to comply with from April 01, 2023.
Related Links (in Czech)
- Press Release on Financial Stability Report
- Financial Stability Report and Data
- Financial Stability Report (PDF)
- Press Release on Adoption of Euro
Keywords: Europe, Czech Republic, Basel, Financial Stability Report, Banking, CCyB, Regulatory Capital, DTI, Stress Testing, LTV, DSTI, Euro Adoption, CNB, Credit Risk
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