The Czech National Bank will have the power by law to set the conditions for obtaining housing loans. So far, it has only been able to make recommendations to banks, but they are not legally binding. The CNB’s opportunities in trading on financial markets will also be expanded. The amendment to the Act on the CNB, which introduces these and other changes, was approved today by the Chamber of Deputies. It rejected the proposals of the Senate, which wanted to include in the law, among other things, milder conditions for banks in providing mortgages. The draft will now be signed by the President.
Minister of Finance Alena Schillerová (for YES) supported the parliamentary version of the law. CNB Governor Jiří Rusnok said that the Senate proposal did not contribute to the quality of the draft.
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. Governor 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. The Senate wanted to increase this limit to 7.5 percent. The exception should mainly apply to applicants for whom the return is sufficiently reliably secured from the bank’s point of view. Minister Schiller warned that this would reduce the effectiveness of regulation.
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 Ministry of Finance informed today.
The Senate also wanted to delete from the draft a provision which gives the CNB the possibility to establish or acquire a legal entity to support the fulfillment of its tasks. The Government states that this proposed change does not imply a change in the legal situation. Until now, this option was based only on a generally defined authorization for investment activity, which is to ensure the tasks of the central bank. According to the government, it is appropriate to insert this rule directly into the law.
The discussed amendment 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. Now he has to pay permanently.
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 and CNB
