December 18, 2017 / 9:10 AM / a year ago

Czech stress tests show banks can withstand adverse scenario

PRAGUE, Dec 18 (Reuters) - The Czech banking sector remains resilient to adverse economic scenarios, mainly due to its high capital ratio and current profitability, the Czech National Bank (CNB) said on Monday.

Czech banks went through the global financial crisis without a need for state assistance and their profits, made despite low interest rates, help them to maintain high capital ratios.

“(The tests) showed that the capitalisation of the banking sector as a whole would remain well above the 8 percent regulatory minimum even in a highly adverse scenario,” the central bank said.

“The sector’s resilience is based mainly on its capital ratio, which stood at 18.4 percent as of 30 September 2017, and on its current profitability,” it said.

In the adverse scenario - assuming a recession lasting 10 quarters with economic growth falling to minus 5 percent - the banking sector as a whole would remain well above the required capital level of 8 percent even in that scenario, CNB said.

However, nine banks, representing 11.9 percent of the sector’s assets, would have to raise 10.3 billion crowns ($472.74 million) to return their capital to the sufficient level.

$1 = 21.7880 Czech crowns Reporting by Robert Muller

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