The rate applies to all banks, savings and credit unions as well as securities dealers. Currently, the rate is 0.5 percent. The CNB usually sets the rate quarterly in advance.
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The CNB informed that in its decision the Board took into account the current position of the Czech economy in the financial cycle, the extent of credit risks in the banking sector’s balance sheet and the development of its vulnerability. “At the same time, it took into account the significant increase in geopolitical uncertainties, which create the potential for increased and faster materialization of cyclical risks accumulated in the financial system,” she said.
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Earlier, the Bank Board decided that the rate would be one percent from July 1, 2022, 1.5 percent from October 1, 2022, and two percent from January 1, 2023 to March 31, 2023. The CNB used the countercyclical capital buffer for the first time at the end of 2015, when it set it at 0.5 percent with effect from 1 January 2017.
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The countercyclical capital buffer is one of the provisions of the EU Directive on the taking up and pursuit of the business of credit institutions and on the prudential supervision of credit institutions and investment firms (CRD IV).
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Banks should create a reserve at a time of credit growth. Conversely, when economic activity declines, accompanied by rising credit losses, it should be used by banks to cover losses.
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The aim is to prevent the transmission of potential problems of financial institutions to the economy. The effect may be a slowdown in credit growth. In addition, there is a capital buffer to cover systemic risk and a safety reserve.
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