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

    EC Rule on Contractual Recognition of Write Down and Conversion Powers

    The European Commission (EC) published the Delegated Regulation 2021/1527 with regard to the regulatory technical standards for the contractual recognition of write down and conversion powers.

    September 17, 2021 WebPage Regulatory News
    News

    APRA Issues Further Guidance on Application of Securitization Standard

    The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to provide guidance to authorized deposit-taking institutions on the interpretation of APS 120, the prudential standard on securitization.

    September 16, 2021 WebPage Regulatory News
    News

    SRB Provides Update on Approach to Prior Permissions Regime

    The Single Resolution Board (SRB) published a Communication on the application of regulatory technical standard provisions on prior permission for reducing eligible liabilities instruments as of January 01, 2022.

    September 16, 2021 WebPage Regulatory News
    News

    APRA Publishes FAQs on Capital Treatment of Overseas Subsidiaries

    The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to clarify the regulatory capital treatment of investments in the overseas deposit-taking and insurance subsidiaries.

    September 15, 2021 WebPage Regulatory News
    News

    EBA Finalizes Guidance to Assess Breaches of Large Exposure Limits

    The European Banking Authority (EBA) published the final report on the guidelines specifying the criteria to assess the exceptional cases when institutions exceed the large exposure limits and the time and measures needed for institutions to return to compliance.

    September 15, 2021 WebPage Regulatory News
    News

    PRA Finalizes Changes to Consolidated Prudential Rules Under CRD5/CRR2

    The Prudential Regulation Authority (PRA) issued the policy statement PS20/21, which contains final rules for the application of existing consolidated prudential requirements to financial holding companies and mixed financial holding companies.

    September 15, 2021 WebPage Regulatory News
    News

    EBA Revises Guidelines on Stress Tests of Deposit Guarantee Schemes

    The European Banking Authority (EBA) revised the guidelines on stress tests to be conducted by the national deposit guarantee schemes under the Deposit Guarantee Schemes Directive (DGSD).

    September 15, 2021 WebPage Regulatory News
    News

    Nordea Bank and EIB Sign Agreement to Fund Green Projects in Nordics

    The European Commission (EC) announced that Nordea Bank has signed a guarantee agreement with the European Investment Bank (EIB) Group to support the sustainable transformation of businesses in the Nordics.

    September 15, 2021 WebPage Regulatory News
    News

    HKMA Endorses Industry Guidance to Support LIBOR Transition

    The Hong Kong Monetary Authority (HKMA) issued a circular, for all authorized institutions, to confirm its support of an information note that sets out various options available in the loan market for replacing USD LIBOR with the Secured Overnight Financing Rate (SOFR).

    September 14, 2021 WebPage Regulatory News
    News

    OCC Issues Booklet on Supervision of Problem Banks

    The Office of the Comptroller of the Currency (OCC) issued a new "Problem Bank Supervision" booklet of the Comptroller's Handbook. The booklet covers information on timely identification and rehabilitation of problem banks and their advanced supervision, enforcement, and resolution when conditions warrant.

    September 13, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7481