Ceska Financni, which was established to deal with asset transfers related to the small banks, was initially set up as a subsidiary of the CNB but was transferred to the KOB group in 2000. The KOB subsidiary Konpo was set up to handle the transfer of bad loans from KB in 2000. Ceska Inkasni was set up to handle bad assets related to foreign trade in an amount of approximately CZK 27 billion; it is the only workout institution that has remained outside the KOB group.
The net cost are slightly smaller, considering the revenues from the sale of the banks which have amounted to the equivalent of about 2.5 percent of GDP.
The base level of nonperforming loans used in the credit risk stress test calculations is adjusted downward by known or anticipated amounts of government guarantees or future asset transfers. Thus, the stress tests exclude the portfolio held by KOB. These adjustments reduce the base level of NPLs in the system by CZK 101.6 billion.
The average debt-equity ratios for groups of enterprises classified as standard and loss were obtained by cross-checking information from the Central Statistical Office with data from commercial banks.
Udaibir S. Das and Plamen Yossifov, IMF.
Act No. 6/1993 Coll. on the Czech National Bank, last amendment—Act No. 442/2000 Coll., December 2000.
Act No. 576/1990 Coll. on Rules of Performance with Budgetary Means of the Czech Republic and Municipalities, as amended; Act No. 530/1990 Coll. on Bonds, as amended; Act No. 528/1990 Coll. on Foreign Exchange, as amended.
Udaibir S. Das (IMF), Antonio J.V. Aguas (Banco de Portugal), and Andy Beadle (Financial Services Authority, United Kingdom). Mr. Aguas has 25 years of experience in the area of banking policy and supervision, while Mr. Beadle has been a practicing banking supervisor for the last six years.
See Core Principles for Effective Banking Supervision (Basel Core Principles), September 1997 and Core Principles Methodology, October 1999.
These include: conduct of supervision: the State Inspection Act (1991), Act on Liability for Damage Caused in the Execution of Public Authority by decision or Incorrect Official Procedure (1998), Code on Administrative Procedures (1967), Act on Auditors (2000); resolution of problem banks. The Code of Civil Procedures (1963), Act on Public Auctions (2000), Act on Bankruptcy and Settlement (2000). The core acts are the CNB Act (2000) and the Act on Banks (1992). Banking operations are also required to be undertaken within the framework of the Foreign Exchange Act (1995), the Securities Act (1992), the Civil Code (1964), the Commercial Code (1991), Act on Bonds (1990), and the Act on Building, Savings and State Aid to Building Saving (1993).
While the assessment is based on current regulations and supervisory practices, it recognizes that the CNB and the MoF are making efforts at introducing decrees on capital adequacy based on credit and market risk on a consolidate basis, improved disclosure through financial statements on a consolidated basis, acquisition of voting shares and decrease in holdings in banks, operating a credit register; regulations relating to liquidity risk and widening the loan classification and provisioning requirements to include additional off-balance sheet items; supervisory tools such as a manual to evaluate and control over bank’s internal control systems, principles of management of credit risk and management of market risk and an internal manual for licensing procedures, development of a standardized memorandum of understanding to be used for information sharing agreements with foreign supervisors and development of an internal VaR model for measuring market risk. Issuance of some of the decrees and regulations would however require amendments to the AoB.
Udaibir S. Das and Plamen Yossifov (IMF).
Undertaken by Donald McIsaac (World Bank).
Udaibir S. Das (IMF), Plamen Yossifov (IMF), and Donald McIsaac (World Bank).
Insurance Act 363/1999 and the Decree No. 75/2000, Act on Accounting, Act on Auditing, and the Commercial Code.
Led by Andrew Procter, a Commission Member and Executive Director of the Hong Kong Securities and Futures Commission. Jeppe Ladekarl, Capital Markets Specialist in the Financial Sector Development Department of the World Bank, also contributed to the assessment.
Udaibir S. Das and Plamen Yossifov (IMF).
The Securities Act (1992), The Securities Commission Act (1998), the Stock Exchange Act, the Bonds Act (1990), and the Investment Companies and Investment Funds Act (1992) as amended.
The CSC supervises the activities of institutional investors (banks which trade with investment instruments on the capital market on their own account, investment companies, investment funds, pension funds and insurance companies that invest and trade on the capital market), securities dealers, public markets organizers, providers of clearing and settlement systems, issuers and owners of securities or other investment instruments.
Prepared by Douglas Webb (World Bank).
Conducted by James Dingle (Bank of Canada).
Udaibir S. Das and Plamen Yossifov (IMF), James Dingle (Bank of Canada).
Act No 6/1993 on the Czech National Bank (CNB Act), as amended through December 2000, Act 21/1992 Coll. on Banks (Banks Act), as amended through December 2000, and CNB Regulation on Interbank Relations and Settlement of 1992 as amended.