Information on the process of integration of financial market supervision

On 7 December 2005, the Chamber of Deputies (the lower house of the Czech Parliament) approved the third reading of the proposal of the Ministry of Finance and the Czech National Bank to integrate financial market supervision into the Czech National Bank. Provided that the bill is approved by the Senate and signed by the President, the Czech Republic will have an integrated financial market supervisory authority as from 1 April 2006. On this date, the CNB will take over the activities of the Czech Securities Commission (CSC), the Office for Supervision of Insurance and Supplementary Pension Insurance and the Office for Supervision of Credit Unions, which will thereby cease to exist. The merger will significantly increase the effectiveness of supervision and at the same time reduce the costs related to its performance.

The process of integration of the present three supervisory authorities into the CNB entails not only taking over the performance of supervision itself, but also operating information systems, taking over property and staff and making the necessary organisational arrangements within the CNB. The aim of the integration is to unify the approaches to supervision and standards, thereby fostering more effective supervision, greater legal security among financial market participants, greater transparency to the public and greater stability of the financial sector as a whole. New arrangements concerning consumer protection on the financial market are to be put in place at the same time. Under the current plans, a financial ombudsman is to become active in the Czech Republic in 2008, completely taking over the issue of consumer protection in all areas of the financial market.

Establishment of the project team

To ensure that the integration process runs smoothly, the CNB Bank Board decided on 22 August 2005 to establish a project team headed by Michaela Erbenová, Chief Executive Director and Bank Board Member. This team has been tasked with completing the legislative process associated with the integration, making the necessary organisational, operational and technical arrangements for the incorporation of the other regulatory bodies into the CNB, and with implementing their subsequent relocation to the CNB. To guarantee a smooth integration process, an implementation plan has been approved for the integration project. This plan defines the organisational, material, personnel and technical conditions for implementing the integration project and sets a project timetable based on these conditions.

Organisation setup for the integration of the current supervisors into the CNB

On 7 October 2005, the Bank Board decided on the exact organisational setup for the integration of the Czech Securities Commission, the Office for Supervision of Supplementary Pension Insurance and the Office for Supervision of Credit Unions into the CNB. Two new departments will be established within the CNB's organisational structure. Just like the other departments of the CNB, these will be managed by the Bank Board. The integration will result in the CNB taking over the specialised work of the aforementioned institutions. In order to maintain continuity, these activities will be carried out by experts transferred from these institutions. New staff will be recruited to existing CNB departments providing ancillary and support activities (e.g. IT, security and human resource management) for the new departments. On 20 October 2005, the Bank Board decided on the number of staff to be taken over.

The new departments will be located at the CNB's headquarters right from the very beginning. In this connection, some of the existing departments will be relocated within the headquarters building to ensure optimal use of premises and better logistical integration. The new distribution of departments in the CNB's headquarters was decided in mid-November and the relocation is now underway. It will continue into the first quarter of 2006.

Future activities

Takeover of archives and documentation is planned for the end of February 2006. The CNB's budget for 2006 will be adjusted to take account of the integration-related expenditures by mid-March 2006. During March, all the necessary changes will be made to the CNB's IT infrastructure, the offices of the new staff will be equipped, and the takeover of activities necessary to ensure supervisory continuity is planned. In 2007 we plan to introduce a new system of regulatory reports which will eliminate the existing duplications in reporting. A detailed survey of the data collected will be prepared during March so that work on the new regulatory reports for 2007 can be launched immediately after the merger.

Assuming that the legislative process is completed successfully in line with the current schedule and the legislation relating to the unification of financial market supervision takes effect on 1 April 2006, the new staff will enter the CNB's headquarters and integrated supervision will be launched on Monday 3 April 2006.