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UPDATE 1-Czech central banker says may hike counter-cyclical buffer for banks
December 5, 2017 / 12:00 PM / 8 days ago

UPDATE 1-Czech central banker says may hike counter-cyclical buffer for banks

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PRAGUE, Dec 5 (Reuters) - The Czech central bank may raise its counter-cyclical capital buffer for banks when next updating its regulatory requirements later this month, Vice Governor Mojmir Hampl said on Tuesday.

The buffer requires banks to set aside capital while the economy is strong so that they will have solid reserves on their books if there is a downturn in the future.

The Czech economy has been growing strongly, with unemployment at record low levels and property prices soaring.

The Czech National Bank (CNB) kept the buffer at 1.0 percent in September after raising it from 0.5 percent in its previous quarterly review when it aimed to keep control of strong credit growth in the central European country.

Asked at an investment conference if he was comfortable with the current setting, Hampl said: “Currently yes”. He added that the bank will release an update to the policy before Christmas.

“I would not exclude that we would announce a further increase in the counter-cyclical buffer, I would not exclude it at all.”

The central bank gives the banks one year to comply with any change to the rate, meaning the 1.0 percent level applies from July 2018.

The bank will announce its next quarterly review to the rate on Dec. 18.

The bank had tried to push through a change to legislation that would allow it to set more nuanced limits on banks’ loan books, including on loan-to-value and loan-to-income ratios, but the parliament rejected the change ahead of an election in October.

Czech banks are subject to a basic 8 percent capital buffer versus their risk exposure, plus a 2.5 percent capital conservation buffer and the 1.0 percent counter-cyclical buffer. Large banks also have additional capital requirements.

The country’s largest banks are KBC’s CSOB, Erste’s Ceska Sporitelna, Societe Generale’s Komercni Banka and UniCredit. (Reporting by Jan Lopatka; Writing by Robert Muller; Editing by Alison Williams and Jane Merriman)

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