Changes in the reserve requirement methodology

Today, 12 July 2001, changes in the reserve requirement methodology enter into force. These consist in the following:

a) a narrowing of the reserve base to primary bank liabilities the maturity of which does not exceed 2 years;

b) the introduction of remuneration of end-of-day balances on settlement accounts at the CNB Clearing Centre (reserve holdings exceeding the required reserves will not be remunerated). The remuneration will equal the rate of the CNB's main repo operations - currently 5% - announced in the CNB Bulletin.

The above changes are part of a programme aimed at gradually harmonising the reserve requirement parameters with ECB standards. These steps will also enhance the competitiveness of Czech banks on both domestic and foreign markets.

Before the introduction of this change, the reserve base had included all primary deposits, accepted credits and issued bonds and similar securities with agreed maturity up to five years held by non-banks. The required reserve holdings were not remunerated.

These adjustments lower the total volume of required reserves of the banking system by approximately CZK 6 billion. The preliminary effect of this measure on the CNB's performance up to the end of the year will be around CZK 700 million, which means an annual cost of approximately CZK 1.4 billion. This positive effect on banks' performance will be the same.

Alice Frišaufová
CNB spokesperson