Czech central bank cuts countercyclical buffer rate, sets systemic risk charge (updated)

Moneta Money Bank, A.s

06/06/2024 16:18

(Updates throughout with details on stress tests, overall
buffer rates, countercyclical outlook)
       PRAGUE, June 6 (Reuters) - The Czech National Bank (CNB)
will cut banks' countercyclical capital buffer rates and
introduce a systemic risk buffer, it said on Thursday after a
financial stability meeting.
    The central bank said it would cut the countercyclical
capital buffer rate applied to banks by 50 basis points to 1.25%
from July. At the same time, it decided to set a systemic risk
buffer at 0.5%, taking effect on Jan. 1, 2025.
    Capital buffers for banks will thus remain at their overall
level, the bank said.
    The bank left its sector rules for mortgage lending
untouched after easing some aspects last November. 
    The mortgage and property markets are seeing a gradual
recovery amid a drop in lending rates after high borrowing costs
cooled activity in the past few years.
    The bank is leaving upper limits on loan-to-value (LTV)
ratios for lending at 80% and 90%, the latter for younger
borrowers. But it said it expanded its recommendation to cover
all consumer credit lending for housing.
    "We can also see demand on the market for non-mortgage
housing loans for reconstruction and energy-saving measures,"
central bank board member Karina Kubelkova said. 
    "With effect from October, we will recommend that lenders
assess with increased caution whether clients with these loans
are taking on excessive risks relative to their income."
    The bank said its decision to lower the countercyclical
rate, which it has been reducing since last year, took account
of declining cyclical risks in the banking sector's balance
sheet. 
    With risks unlikely to change, it said, the buffer rate was
expected to remain stable over its latest outlook period.
    In its stress testing, the bank said the banking sector
would meet capital requirements in both its baseline and adverse
scenarios in stress tests, although the latter would hit bank
capitalisation.
    "Stress tests have indicated that the Czech financial sector
remains resilient to adverse economic developments, thanks
partly to the capital buffers applied," the bank said.
    

 (Reporting by Jason Hovet and Jan Lopatka)
 ((jason.hovet@thomsonreuters.com;))