Czech banks have reported an increase in demand for euro loans and other foreign currencies since the Czech National Bank (ČNB) weakened the crown last fall. ČNB has promised to keep the exchange rate at CZK 27 per euro until at least the end of 2014. Analysts expect the crown to strengthen once this round of intervention is over, ultimately resulting in lower loan values. One-sixth of the total loan volume granted by Czech banks since November was in foreign currencies, with the majority being in euros. This is the highest recorded volume since 2002, writes Hospodářské noviny.
In November and December, immediately after ČNB’s intervention, the volume of foreign currency loans jumped 30 percent. Economists point out that international businesses active in the Czech Republic have become increasingly dependent upon Czech banks as lenders instead of other European banks. Unlike their European counterparts, Czech banks have a cash surplus and welcome the opportunity to lend in euros or US dollars.
