Czech Central Bank Urged Stronger Assurance on EU Banking

The Czech Republic should have sought stronger assurances that the single European banking supervisor won’t weaken its domestic regulatory powers, the central bank said.

European Union leaders agreed to start work next year on a single-resolution mechanism for euro-area banks to complement the European Central Bank’s oversight role approved yesterday. The Czech Republic, which isn’t a member of the 17-nation euro area, had requested guarantees that the new supervisory framework won’t weaken its domestic regulator, the central bank.

The Czech political representation didn’t fully incorporate the central bank’s recommendations into its position, the Prague-based Ceska Narodni Banka said in an e-mailed statement today.

“In our opinion, the assurances given to the Czech Republic could be stronger,” Miroslav Singer, the bank’s governor, said in the statement. “In the final phases of the negotiations, we at the CNB had a different view on the extent to which the proposed compromise sufficiently allays the concerns that we jointly identified at the outset together with the other Czech authorities.”

The Czech Republic, which has no target date for joining Europe’s single currency, is seeking to prevent an outflow of deposits from local banks.

Deposits in Czech banks, mostly owned by foreign institutions including Erste Group Bank AG, KBC Groep NV (KBC) and Societe Generale SA, exceed loans by more than 30 percent, according to central bank statistics.

To contact the reporter on this story: Peter Laca in Prague at placa@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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