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

    BIS Report Notes Existing Gaps in Climate Risk Data at Central Banks

    A Consultative Group on Risk Management (CGRM) at the Bank for International Settlements (BIS) published a report that examines incorporation of climate risks into the international reserve management framework.

    July 29, 2022 WebPage Regulatory News

    EBA Examines Remuneration Data and Use of Large Exposure Exemptions

    The European Banking Authority (EBA) published a report that examines the use of certain exemptions included in the large exposures regime under the Capital Requirements Regulation (CRR).

    July 22, 2022 WebPage Regulatory News

    BoE Issues Update on Ongoing Data Transformation Program

    The Bank of England (BoE) issued a communication to firms to provide an update on the progress of the joint data transformation program—which is being led by BoE, the Financial Conduct Authority (FCA), and the industry—for the financial sector in UK.

    July 21, 2022 WebPage Regulatory News

    EBA Issues Draft Methodology and Templates for 2023 Stress Tests

    The European Banking Authority (EBA) published the draft methodology, templates, and template guidance for the European Union-wide stress test in 2023.

    July 21, 2022 WebPage Regulatory News

    EBA Issues SREP Guidelines and Standards for Investment Firms

    The European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) jointly published the final guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP) for investment firms.

    July 21, 2022 WebPage Regulatory News

    BoE and PRA Publish Regulatory Updates for Financial Sector Entities

    The Prudential Regulatory Authority (PRA) proposed expectations, via CP8/22, in respect of changes to the instruments or claims that comprise unvested deferred sums awarded to material risk-takers as part of their variable pay.

    July 19, 2022 WebPage Regulatory News

    EIOPA Issues Taxonomy for Solvency II Reporting, Issues Other Updates

    The European Insurance and Occupational Pensions Authority (EIOPA) published Version 2.7.0 of the Solvency II data point model (DPM) and XBRL taxonomy.

    July 16, 2022 WebPage Regulatory News

    OSFI Updates Address BCAR Reporting, Basel Reforms, and Cyber Risk

    The Office of the Superintendent of Financial Institutions (OSFI) updated the 2023 Basel Capital Adequacy Reporting (BCAR) manual as well as the 2023 BCAR return.

    July 15, 2022 WebPage Regulatory News

    FSB Report Outlines Progress on Climate Risk Roadmap

    In a letter to the G20 Leaders, ahead of the July 2022 meeting, the Financial Stability Board (FSB) Chair set out an overview of the key work done by FSB.

    July 14, 2022 WebPage Regulatory News

    SRB Issues Resolvability Assessment and Bail-in Implementation Guide

    The Single Resolution Board (SRB) published its resolvability assessment and "heat map" for 2021, updated the operational guidance on implementation of bail-in tool, and issued the annual report for 2021.

    July 14, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8400