Bloomberg the Company & Products

Bloomberg Anywhere Login

Bloomberg

Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.

Company

Financial Products

Enterprise Products

Media

Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000

Communications

Industry Products

Media Services

Follow Us

Czech Banks May Need More Funds in Crisis Scenario, Test Shows

March 6 (Bloomberg) -- Several Czech lenders would need a capital injection if the euro area’s debt crisis worsened significantly, while the banking industry as a whole would remain stable, results of central bank stress tests showed.

The Prague-based Ceska Narodni Banka said it tested banks under two outlooks, including economic developments according to the bank’s own forecast and a stress scenario assuming an “extreme decline in economic activity stemming from a significant deepening of the debt crisis in the euro area.” The stress scenario, covering the next three years, implied rising risk aversion and a decline in Czech government bond prices.

“Capital adequacy of the entire industry would remain above the 8 percent regulatory minimum even in the very unfavorable stress scenario, which combines negative developments in the domestic and foreign economies and a renewed uncertainty on financial markets,” the central bank said in a report published today on its website.

The Czech Republic didn’t have to bail out any banks during the global financial crisis as the amount of toxic assets accounted for less than 1 percent of all assets and deposits exceeded loans, according to central bank data. The economy depends on demand from the euro area, which takes about 70 percent of all Czech exports.

“Several banks” would need a capital injection totaling about 19 billion koruna ($1 billion), or 0.5 percent of gross domestic product, in the debt-crisis scenario that assumed a GDP fall of more than 6 percent in the third and fourth quarters of this year, the central bank said in the regular quarterly report on the health of financial institutions.

The bank also forecast the share of non-performing corporate loans held by Czech banks to rise to “nearly” 9 percent from the second half of 2012 in the basic economic scenario based on its forecast. The overall capital-adequacy ratio of Czech banks was 15.2 percent at the end of last year

Link to Company News: {EBS AV <Equity> CN <GO>} Link to Company News: {RBI AV <Equity> CN <GO>}

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

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.