CNB keeps mortgage lending rules and countercyclical and systemic risk buffer rates unchanged
The Czech financial sector is stable and resilient to potential adverse effects, according to the conclusions of the Czech National Bank (CNB) Bank Board’s financial stability meeting today. In addition to domestic risks related to mortgage lending and the financial cycle, the Bank Board assessed risks stemming from global economic developments.
The Czech economy is in the growth phase of the financial cycle. “Transaction activity on the mortgage market is returning to its long-term average, and growth in residential property prices has picked up considerably. We therefore still consider it necessary to leave the LTV limit at 80% (or 90% for applicants under 36 years),” said CNB Bank Board member Jakub Seidler following the Bank Board meeting on financial stability issues today. The DTI and DSTI ratios remain deactivated, as banks are not easing credit standards for mortgage loans across the board for the time being, and the related systemic risks are not increasing.
The Bank Board also evaluated the resilience of the banking sector in the context of domestic and global economic developments and decided to leave the countercyclical capital buffer rate at 1.25%. In its decision, it took into account the level of cyclical risks in the sector’s balance sheet. The CNB expects these risks to increase slightly over the outlook horizon of the spring forecast, but the current buffer rate is sufficient to cover this increase. “Potential adverse developments in the global economy and uncertainties in international trade may increase some structural risks in the Czech economy, so the banking sector’s resilience should continue to be strengthened using the systemic risk buffer, which has been applied at 0.5% since 1 January 2025,” said Jakub Seidler.
The banking sector is well capitalised. As a whole, it passed a stress test based on an adverse scenario used by the European Banking Authority to test the EU banking sector in 2025. “The profitability, capital buffers and asset quality of the banking sector create favourable conditions for absorbing the shocks considered in the stress test,” said Libor Holub, Executive Director of the CNB’s Financial Stability and Resolution Department.
In its Financial Stability Report, the CNB regularly assesses the soundness of the domestic financial sector and its resilience to adverse shocks. The report forms the foundation for configuring macroprudential policy tools, in particular bank capital buffers and borrower-based measures. The CNB will publish the latest Financial Stability Report – Spring 2025 on 23 June 2025. The minutes of today’s Bank Board meeting on financial stability issues, including the votes cast by the individual Bank Board members on macroprudential policy measures and also attributed arguments, will be published the same day.
Jakub Holas
Director, Communications Division
Notes for journalists:
Financial stability has been a key objective of the Czech National Bank alongside price stability since 2013. Maintaining financial stability is defined in Act No 6/1993 Coll., on the Czech National Bank. The Act requires the CNB to set macroprudential policy by identifying, monitoring and assessing risks jeopardising the stability of the financial system and, in order to prevent or mitigate these risks, to contribute by means of its powers to the resilience of the financial system and the maintenance of financial stability. Since the second half of 2021, the CNB has had the statutory power to set upper limits on the LTV, DTI and DSTI ratios (borrower-based measures). Compliance with the limits must be legally binding in order to ensure a level playing field on the market.
The Bank Board discusses financial stability issues twice a year – in the spring in May or June, and in the autumn in November. The aim of the Financial Stability Report is to identify the risks to the financial stability of the Czech Republic in the near future on the basis of previous and expected developments in the real economy and the financial system.
The main macroprudential policy tools applied in the Czech Republic are the countercyclical capital buffer (CCyB), the capital conservation buffer (CCoB), the capital buffer for other systemically important institutions (O-SIIs) set only for systemically important banks, the systemic risk buffer, upper limits on the LTV, DTI and DSTI credit ratios set for all mortgage lenders, and the Recommendation on the management of risks associated with the provision of consumer loans secured by residential property.
Countercyclical capital buffer (CCyB) – This instrument is aimed at increasing the resilience of the banking sector to risks associated with fluctuations in lending activity. The CCyB should enable banks to lend to households and firms even at a time of recession or financial instability.
Systemic risk buffer (SyRB) – This buffer is intended to mitigate the potential impacts of systemic risks identified on the financial system and the real economy. If their level poses a risk to financial stability, the application of the SyRB enhances the capitalisation of the banking sector and increases its resilience to adverse shocks. At the same time, it may help reduce the growth or concentration of the relevant exposures in banks’ balance sheets, although this is not its primary purpose.
Capital conservation buffer (CCoB) – This instrument is aimed at preserving a bank’s capital. Under the Act on Banks, all banks are obliged to maintain this buffer. The CCoB rate is 2.5% and does not change over time.
Capital buffer for other systemically important institutions (O-SIIs) – This instrument is aimed at mitigating risks connected with the potential destabilisation of systemically important institutions, which could have significant adverse effects on the financial system and the economy as a whole. The CNB is required to draw up a list of O-SIIs and calibrate the buffer for individual O-SIIs at least once a year.
Combined capital buffer – the sum of the capital conservation buffer (CCoB), the countercyclical capital buffer (CCyB), the systemic risk buffer (SyRB) and the capital buffer for other systemically important institutions (O-SII).
LTV (loan-to-value) – the ratio of the value of a mortgage loan to the value of collateral.
DTI (debt-to-income) – the ratio of the applicant’s total debt to their net annual income.
DSTI (debt-service-to-income) – the ratio of the sum of the applicant’s monthly repayments to their net monthly income.