Central Bank Lowers Countercyclical Capital Buffer Rate, Eases Mortgage Rules

The Czech National Bank says in a statement after a Bank Board meeting on financial stability that it has decided to cut the countercyclical capital buffer rate by 25bp to 2.25%, effective July 1, while deactivating the upper limit on the DSTI ratio.

• In deciding to lower the countercyclical capital buffer rate, the Bank Board "took into account the position of the economy in the downward phase of the financial cycle, the extent of previously accepted cyclical risks in the banking sector’s balance sheet, and the current level of economic and geopolitical uncertainties." It is "ready to lower the buffer rate gradually further if we see a continuation of the trend of cyclical risks naturally fading out of the banking sector’s balance sheet."
• "The CNB Bank Board today decided to leave the upper limits on the LTV and DTI ratios unchanged and deactivated the DSTI limit," the central bank said in a statement. Governor Ales Michl added that "at a time when we are fighting elevated inflation, it is essential to keep mortgage-lending conditions tight. At higher interest rates, however, the DSTI limit is not necessary."
• Commenting on the upcoming spring edition of the Financial Stability Report, Executive Director of the CNB’s Financial Stability Department Libor Holub said that "the banking sector has long been in good shape. Although credit portfolio quality remains a risk going forward, its gradual deterioration observed last year came to a halt at the start of this year."
• The statement can be accessed using this link. The full Financial Stability Report - Spring 2023 alongside the minutes of today's Bank Board meeting on financial stability issues, including the vote splits, will be published on June 19.