CNB statement regarding potential postponement of client loan instalments by banks

On Sunday 22 March, the Association of Exporters and the Association of the Textile, Clothing and Leather Industry called on the CNB to relax the rules for postponing loan instalments, which they say are tying the hands of commercial banks. In response, the CNB states that it is well aware of the risks of the current pandemic situation and its impacts on firms, households and financial stability. That is why the CNB Bank Board adopted coronavirus-related stabilising measures at an extraordinary meeting on 16 March 2020. As part of these measures, the CNB stated that, under the applicable rules, a repayment holiday should not necessarily lead to the loan being reclassified as classified, or non-performing. According to the CNB, banks thus already have sufficient flexibility to grant repayment holidays to clients hit by a shortfall in demand or unpaid invoices for supplies of goods and services due to the coronavirus.

The practical application of the rules has been, and is, discussed on an ongoing basis with the Czech Banking Association and with individual banks addressing the specific settings of their internal rules for categorising loans and calculating provisions. "That's how we clearly communicated it to the banking sector, and I trust that banks will, at this 'moment of truth', prove that their pro-client statements were not all just empty marketing," said Deputy Governor Tomáš Nidetzký, who oversees the areas of financial market supervision and financial stability on the Bank Board.

The CNB also informed banks that they should proceed on a case-by-case basis with regard to non-retail clients, assessing in more detail - especially for large clients and loans - the impact of the current situation on clients' overall financial situation and ability to repay in the future. 

Going forward, it will be important to continuously monitor the creditworthiness of clients who have been allowed to postpone their instalments so that banks can detect any further deterioration of their situation in good time. Where clients are granted repeated repayment holidays or other relief, banks should reclassify their loans as non-performing.

In this interpretation, the CNB gives banks some flexibility in assessing the categorisation of loans and calculating provisions, as they are required to do under the directly applicable EU regulations. At the same time, however, the CNB expects banks to create provisions in good time depending on the evolution of portfolio risk. "Just like we track the number of persons infected by the coronavirus, we must also track the number of firms hit by the coronavirus. In this case, the government and banks are the doctors, with the central bank supporting them," added Deputy Governor Nidetzký. 

Markéta Fišerová
Director of the Communications Division and CNB spokesperson