trending Market Intelligence /marketintelligence/en/news-insights/trending/7oyjG8-XnwBj1mbsGxk82Q2 content esgSubNav
In This List

Czech central bank ups countercyclical capital buffer rate to 1.25%

Podcast

Street Talk Episode 87

Blog

A New Dawn for European Bank M&A Top 5 Trends

Blog

Insight Weekly: US banks' loan growth; record share buybacks; utility M&A outlook

Blog

Banking Essentials Newsletter 2021: December Edition


Czech central bank ups countercyclical capital buffer rate to 1.25%

The Czech banking sector is sufficiently resilient to potential adverse shocks, the central bank said as it announced an increase in the countercyclical capital buffer rate to 1.25%, effective from Jan. 1, 2019.

Ceská národní banka Vice-Governor Vladimír Tomšík said continuing rapid growth in bank loans, especially to households for house purchase and consumption, contributed to the central bank board's decision to raise the countercyclical capital buffer rate. The central bank first increased the rate to 0.5% from zero in December 2015, with effect from Jan. 1, 2017, before raising it further to 1.0% in June 2017, with effect from July 1, 2018.

Introduced in the EU in 2014, a countercyclical capital buffer requires banks to build up an additional buffer of capital that can be released at times of falling economic activity and rising credit losses, so that nonfinancial corporations and households can continue to have access to loans without excessively tight conditions.

Meanwhile, results of the latest macro-stress tests conducted by the central bank showed that the capitalization of the Czech banking sector as a whole would remain well above the regulatory minimum requirement of 8% even in a highly adverse scenario, which assumes a sharp decrease in economic activity both in the Czech Republic and abroad.

The central bank said the sector's resilience is based mainly on its capital ratio, which stood at 18.4% as Sept. 30, and on its current profitability.