The Czech National Bank will have the power by law to set the conditions for obtaining housing loans. Until now, it could only give banks recommendations, but they are not legally binding. The CNB’s opportunities in trading on financial markets will also be expanded. An amendment to the Act on the CNB, which introduces these and other changes, was signed today by President Miloš Zeman.
The amendment gives the central bank the legal power to set the conditions for obtaining housing loans, which banks and other lenders will have to comply with. If they violate this, they will face a fine of up to ten million crowns. These limits are intended to prevent systemic risk. CNB Governor Jiří Rusnok has previously pointed out that housing loans account for more than half of loans granted.
However, the draft allows banks to provide up to five percent of loans in the total volume of mortgages provided each quarter, which will not have to meet the limits. But the bank must justify them.
Until now, the CNB has operated in its recommendations indicators monitoring the amount of the mortgage to the value of the collateral (LTV indicator), the applicant’s income to total debt (DTI indicator) and the repayment amount (DSTI indicator). However, these recommendations are not legally binding. Thanks to the amendment, the central bank will be able to set an upper limit for one indicator, for a combination of two indicators, or for all three indicators, in a binding manner, with the possibility of effective enforcement of compliance.
The signed amendment to the law also expands the CNB’s trading opportunities on the financial markets. It will be able to trade with more counterparties and with a larger number of financial instruments. However, a number of opposition deputies called this risky and expressed concerns that the central bank could finance the operation of the state in this way, which was rejected by both Minister Schiller and the CNB. year.
In addition to banks, savings and loan associations, it will be possible to include insurance companies, pension companies and other institutional investors. Both the Ministry of Finance and the CNB promise to be able to intervene in the financial market more flexibly in the event of fluctuations.
Source: CTK
