Overview of all CNB measures related to the coronavirus crisis in one place

The CNB is taking steps to support an economy hit by the coronavirus epidemic. You will find a comprehensive overview of everything that might interest you in connection with the coronavirus and the CNB at a special website.

Due to the spread of the coronavirus and the related measures, the CNB expects the Czech economy to record a sharp economic downturn, in which it will remain for the rest of this year.

At its extraordinary monetary policy meeting held on 16 March 2020, the CNB Bank Board unanimously adopted measures to mitigate the impacts of the situation caused by the coronavirus epidemic on Czech firms, self-employed individuals and households.

This was followed by further steps approved on 26 March 2020 and 7 May 2020.

The CNB has cut all key interest rates in three steps. It first lowered the key two-week repo rate by 0.5 percentage point on 16 March 2020, then by another 0.75 percentage point on 26 March 2020 and by another 0.75 percentage point on 7 May. The two-week repo rate is currently set at 0.25%, the Lombard rate at 1.00% and the discount rate at 0.05%.

The CNB expects the coronavirus epidemic to cause a downturn in economic activity, which will very likely unfavourably affect the quality of banks’ loan portfolios.

The CNB allowed banks to postpone loan instalments where clients temporarily lose their income due to the coronavirus epidemic or preventive measures.

The CNB has lowered the countercyclical capital buffer rate on bank loans located in the Czech Republic from the current 1.75% to 1% with effect from 1 April 2020. This decision means that banks will need less capital for every loan provided to the domestic economy. This will give them more leeway for lending to firms, the self-employed and individuals hit by the impacts of the coronavirus pandemic. If necessary, the CNB will fully release this buffer.

The CNB has called on banks to withhold dividend payments or refrain from other steps which might jeopardise their capital resilience.

A gradual release of the countercyclical capital buffer combined with postponed dividend payments should help increase banks’ ability to finance the real economy.

As a preventive measure, the CNB increased the weekly number of monetary policy operations providing liquidity to banks. The liquidity-providing repo operations are now announced three times a week (on Monday, Wednesday and Friday) instead of the original weekly frequency. Banks’ bids in these operations will be fully satisfied at a fixed rate corresponding to the two-week repo rate, i.e. with a zero spread. Later it extended the maturity of these operations and broadened the range of eligible collateral, i.e. assets which may be accepted as collateral from credit institutions in exchange for the provided liquidity.

Clients of banks may postpone loan instalments by three or six months under Act No. 177/2020 Col. on some measures in the area of loan repayment in connection with the COVID 19 pandemic (the loan moratorium). The moratorium is binding for all bank and non-bank lenders. It is possible to postpone instalments of both consumer and business loans, including mortgages agreed and drawn before 26 March 2020. If customers use the moratorium, the loan repayment period will be extended accordingly.

With effect from 1 April 2020, the CNB has relaxed its recommendation for the assessment of new mortgages. The LTV limit (the size of the loan relative to the value of the pledged property) has been increased to 90% (from 80%), so the applicant's savings for down payment on house purchase can be lower. As of the same date, the limit on the DSTI ratio (total debt service relative to net monthly income) has been increased to 50% (from 45%). This has lowered the amount of income necessary for servicing a specific debt. The duty to assess new mortgages according to the DTI ratio, which reflects the number of the household's annual net incomes needed to repay all its debts, has been omitted from the CNB recommendation to banks. From now on, credit institutions will only monitor this indicator.

In connection with the course of events and the Statement on supervisory reporting and Pillar 3 disclosures in light of COVID-19 issued by EBA on 31 March 2020 we would like to inform you about potential  relief from disclosure of information pursuant to Regulation (EU) No 575/2013 and Decree No 163/2014 Coll. – see the details here (available in Czech only).

Insurance sector and pension management companies

  • With regard to the current situation, the CNB would like to inform the public that it is ready to give domestic insurance companies, reinsurance companies and pension management companies (hereinafter the “supervised entities”) some flexibility in the fulfilment of their disclosure duty consisting in the submission and publication of their 2019 annual report (including a consolidated annual report) so that this duty may be fulfilled by 30 June 2020. At the same time, however, the CNB expects that, despite this possibility, the supervised entities and their auditors will make sufficient effort to fulfil this duty within the regular deadline. If, despite that, the submission and publication of the annual report is not possible within the statutory deadline, the supervised entity shall inform the CNB in time, stating the reasons and the expected deadline for the fulfilment of this duty. In addition, this information shall be published in a manner commonly used for the fulfilment of disclosure duties. The supervised entity is then obliged to submit its annual report and approved financial statements to the CNB and publish them as soon as possible. The CNB thus takes the same view as published by ESMA on 27 March 2020 with regard to the disclosure duties of listed issuers and EBA on 31 March 2020 with regard to regulated entities. It is ready to apply a comparable approach also to supervised domestic insurance companies, reinsurance companies and pension management companies.
  • The CNB has called on insurance companies and pension management companies to withhold dividend payments or refrain from other steps which might jeopardise their capital resilience. It has also endorsed the issuance of the EIOPA statement on dividends distribution and variable remuneration policies.  The aim is to make (re)insurers  temporarily suspend dividend distributions and share buy backs aimed at remunerating shareholders in the current situation. This approach should be applied by all (re)insurance groups at the consolidated level. The EIOPA also expects (re)insurers to review their current remuneration policies and ensure that they are sufficiently conservative, prudential and reflective of the current situation. (Re)insurers that consider themselves legally required to pay-out dividends or large amounts of variable remuneration should inform the CNB in advance and explain the underlying reasons. This statement is following up on the previous more general EIOPA statement on actions to mitigate the impact of COVID-19 under which (re)insurers should be ready to implement the necessary measures to ensure business continuity, to ensure their solvency and capital positions and to protect consumers.
  • The CNB has endorsed the EIOPA recommendation regarding the deadlines for some reports and disclosures by insurers and reinsurers. Under this recommendation, an 8-week delay  in the submission of reports is accepted. Exceptions include annual reports on the balance sheet, own funds or SCR calculation, for which only a 2-week delay is accepted due to their importance. The CNB also accepts an 8-week delay for the regular report to supervisory authorities.  As regards statements of insurers and reinsurers for 2020 Q1, it is recommended to accept a 1-week delay. An exception is the quarterly report on derivatives transactions, for which a 4-week delay in the deadline is recommended. Also recommended is an 8-week delay in the deadline for the publication of the solvency and financial situation report for 2019, with the exception of some important information (e.g. on the balance sheet, own funds of SCR calculation) which should not be published with a delay of more than two weeks.
  • The CNB has also endorsed that the EIOPA is extending the consultation period in relation to currently open consultations.
  • For preventive reasons, the CNB has prepared a liquidity-providing instrument for some non-bank entities licensed by the CNB. These institutions will newly be able to obtain liquid funds in the form of a short-term loan from the CNB.

Credit unions

  • The conclusions in the Measures for banks section apply to all credit institutions, i.e. also to credit unions.
  • For preventive reasons, the CNB has prepared a liquidity-providing instrument for some non-bank entities licensed by the CNB. These institutions will newly be able to obtain liquid funds in the form of a short-term loan from the CNB.

Capital market

  • The CNB accepts if obliged entities on the capital market (other than listed companies – for these see a separate recommendation) which were to submit their annual reports before the end of April, send and publish their annual reports before 30 June 2020, provided that they inform the CNB about the planned delay and the underlying reasons. 
  • The CNB has endorsed the ESMA public statement to clarify issues concerning the publication of the data on the quality of execution of transactions under Commission Regulation No. 2017/575 (RTS 27) and the publication by investment firms of information on the identity of execution venues and on the quality of execution under Commission Regulation No 2017/576 (RTS 28). Execution venues shall publish the RTS 27 data for 2019 Q4 due by 31 March 2020 as soon as reasonably practicable after that date and no later than by the following reporting deadline (i.e. 30 June 2020); investment firms shall publish the RTS 28 data for 2019 due by 30 April 2020 on or before 30 June 2020.
  • The CNB has endorsed the ESMA public statement to clarify issues concerning reporting in line with Commission Regulation  2015/2365 on transparency of securities financing transactions and of reuse. Obliged persons which would otherwise be obliged to report as of 13 April 2020 may do so until 13 July 2020.
  • In connection with the course of events and the Statement on supervisory reporting and Pillar 3 disclosures in light of COVID-19 issued by EBA on 31 March 2020 we would like to inform you about potential  relief from disclosure of information pursuant to Regulation (EU) No 575/2013 and Decree No 163/2014 Coll. – see the details here (available in Czech only).

The CNB allowed banks to postpone loan instalments where clients temporarily lose their income due to the coronavirus epidemic or preventive measures. In the CNB’s view, banks thus already have sufficient flexibility in postponing instalments for clients hit by a drop in demand or unpaid invoices for goods and services deliveries due to the coronavirus. This applies to all types of loans, i.e. loans to small clients and particularly loans to corporate clients, with the aim to prevent potential spillovers of negative impacts between sectors.

Banks will work individually with individual clients to determine the reasons behind their payment problems to adjust the repayment schedules for their loans accordingly. This will apply provided that clients’ problems are only temporary and their ability to repay a loan in the future has not been fundamentally jeopardised.

The manner in which banks will enable postponed instalments for clients hit by a drop in demand or unpaid invoices for goods and services deliveries due to the coronavirus now depends on their individual approach. It is purely their business decision.

For information on the postponement of instalments please contact your bank. As the systems and approaches of the individual banks differ, the CNB cannot provide a single guide on how banks should proceed.

Clients of banks may postpone loan instalments by three or six months under Act No. 177/2020 Col. on some measures in the area of loan repayment in connection with the COVID 19 pandemic (the loan moratorium). The moratorium is binding for all bank and non-bank lenders. It is possible to postpone instalments of both consumer and business loans, including mortgages agreed and drawn before 26 March 2020. If customers use the moratorium, the loan repayment period will be extended accordingly.

With effect from 1 April 2020, the CNB Bank Board has relaxed its recommendation for the assessment of new mortgages. The LTV limit (the size of the loan relative to the value of the pledged property) has been increased to 90% (from 80%), so the applicant's savings for down payment on a house purchase can be lower. As of the same date, the limit on the DSTI ratio (total debt service relative to net monthly income) has been increased to 50% (from 45%). This has lowered the amount of income necessary for servicing a specific debt. The duty to assess new mortgages according to the DTI ratio, which reflects the number of the household's annual net incomes needed to repay all its debts, has been omitted from the CNB recommendation to banks. From now on, credit institutions will only monitor this indicator.

In accordance with the European Securities and Markets Authority (ESMA), the CNB recommends issuers of securities admitted to trading on a regulated market the following:

  • Information duties – issuers should as soon as possible provide the market with any important information regarding the specific impact of COVID-19 on their – or their consolidated group’s – nature, financial situation, business activity or performance.
  • Financial reporting – issuers should be transparent in relation to both current and possible future impacts of COVID-19 on their financial data.
  • Publication of the annual report for 2019 – with regard to the current situation and in accordance with ESMA recommendations, the CNB is stating that it will accept the sending and publication of annual (consolidated) reports, whose balance sheet date is 31 December 2019 and later (no later than 1 April 2020), in a period of two months after the deadline stipulated in Article 118(1) of the Capital Market Undertakings Act.

More information is available at the supervision and regulation website and in the document entitled Information for issuers of securities admitted to trading on a regulated market in relation to the COVID-19 epidemic (In Czech only).

At this moment, the CNB is not implementing or planning any special measures relating to cash handling or cash disinfection.

The risk of transmission of the virus by banknotes and coins is low and no scientific study confirms the danger of such transmission. No warning regarding coronavirus transmission via banknotes has ever been issued by the WHO either.

The current situation regarding the coronavirus should not therefore lead to an unjustified (or even intentional) raising of public fear of using cash in favour of non-cash payments. The CNB processes banknotes and coins in a standard manner just like other central banks. Banknotes and coins remain, more than ever, an essential means of payment for goods and services. The volume of banknotes and coins in circulation continues to grow.

There is no risk of distributing potentially infected currency

Like other respiratory diseases, the coronavirus spreads from human to human through close contact, most easily by droplet infection. The virus survives outside a human organism for no more than several hours and for several days at most, depending on the type of surface. However, banknote and coin processing at the CNB takes longer, lasting days. Logically, the distribution of potentially infected currency from the CNB is thus impossible, as the virus does not survive for such a long time while banknotes and coins wait at the CNB for return into circulation.

It is impossible to disinfect banknotes effectively due to the amount of them in circulation (almost 500 million banknotes and more than two billion coins) and the number of participants in currency circulation. In general, it is necessary to pay attention to increased hygiene when handling banknotes, about which the public has already been informed.

Statements issued by foreign banks

The German central bank has issued a statement (external link, in English), in which it points out that coins and banknotes pose no particular risk of coronavirus infection. “Coronavirus is mainly spread by infected droplets transmitted by coughing, sneezing or also talking. Banknotes and coins do not pose a particular risk of infection for the public. The probability of becoming ill from handling cash is smaller than from many other objects used in everyday life.”

The French central bank also issued an official statement saying that there is “no evidence supporting the hypothesis that cash is a vector promoting the spread of the virus.”

The European Central Bank is now also waiting for the results of a study on coronavirus transmission via banknotes and coins, which is being prepared by the University of Glasgow in Scotland and the European Centre of Disease Prevention and Control in Sweden. Interim results confirm that the lifespan of the virus is short on banknotes and coins and that its active concentration decreases quickly.

On 3 April, the Bank for International Settlements (BIS) published a study on Covid-19 in which it established that “the available scientific evidence shows that the probability that banknotes transmit the coronavirus is low, compared to that of other objects, such as electronic payment terminals“.

A document prepared by the Mint Directors Working Group (MDWG) in cooperation with the Monnaie de Paris (pdf, 184 kB) summarising the available information on the use of cash during the pandemic. 

On Monday 25 May, the Czech National Bank resumed teller services for the public to the full extent. It is now possible to exchange damaged banknotes and coins and use other services for the public at the CNB offices in Prague, Brno, Ostrava, České Budějovice, Hradec Králové, Plzeň and Ústí nad Labem.

The Czech National Bank is reopening the CNB Archive to the public from Monday 1 June 2020.

The Czech National Bank is reopening the People and Money exhibition in Prague and in Brno to the public from Tuesday 2 June 2020.