CNB Board Meeting of 4 June 1998

At its meeting on 4 June 1998, the Czech National Bank Board discussed the Report on Banking Sector Development for Q1 1998. Increased bank prudence is a noticeable trend in the report which is reflected in a reduction in credit activities, declining securities trading and the strengthening of bank liquidity. In spite of this, the share of classified loans increased in this period, largely owing to the worsened solvency of some clients. The major problems in this respect are the imperfections in the existing laws and law enforcement disabling the effective recovery of outstanding debts and foreclosure proceedings. The inadequate legal protection of creditors in relation to debtors multiplies the need for the additional creation of provisions in banks, particularly for receivables secured by real estate. Correcting these imperfections, as well as strengthening macroeconomic stability, reforming the capital market and other systemic measures, is one way of confronting the current risks in the banking sector.

In this context, the Board also considered the decision to quicken the privatisation of state shares in large banks as a positive step forward.

CNB - M. Švehla