Minutes of the CNB Bank Board meeting on financial stability issues on 27 November 2025

Present at the meeting: Aleš Michl, Eva Zamrazilová, Jan Frait, Karina Kubelková, Jan Kubíček, Jan Procházka, Jakub Seidler

The meeting opened with a presentation given by the Financial Stability and Resolution Department containing the main conclusions of Financial Stability Report – Autumn 2025. The key points of the presentation were an assessment of the position of the domestic economy in the financial cycle and an evaluation of the risks associated with the continued rapid growth in residential property prices amid increasing activity in the mortgage loan market. In addition, the Department presented the results of a banking sector stress test and related sensitivity analyses. Using this background material, the Bank Board then evaluated the current risks to financial stability and discussed the appropriate calibration of macroprudential policy instruments – the countercyclical capital buffer and borrower-based measures (upper limits on the LTV, DSTI and DTI ratios).

In a general assessment of the situation, the Board agreed that the banking sector and the other segments of the financial sector remained well capitalised and had a robust liquidity position and profitability. This made the financial sector more resilient to highly adverse developments, a conclusion confirmed by the results of the banking sector stress test.

The countercyclical buffer (CCyB) rate

In the part of its presentation dealing with the CCyB rate, the Financial Stability and Resolution Department said the domestic economy had shifted further into the growth phase of the financial cycle as expected. This shift primarily reflected continued growth in residential property prices and a related rise in the volume of newly negotiated mortgage loans. Overall, however, cyclical risks were not building up excessively across the board for now, and their growth remained generally moderate over the outlook as well. The subsequent outlook for the cycle was subject to uncertainty, tending towards faster growth because of a potential increase in the optimistic expectations of households and stronger investment activity by non-financial corporations.

The Board agreed with the Department’s opinion and identified developments in the mortgage and property markets as the main factors shifting the domestic economy higher in the financial cycle. However, there was a consensus that the scale of newly accepted cyclical risks was in line with expectations and that their accumulation in banking sector balance sheets was gradual for now. Jan Frait said it would be relevant to discuss raising the rate if the upward trend continued. It was desirable to keep it at a sufficient level partly because of potential market pressure on banks to expand their loan portfolios amid heightened pressure on profit margins. A significant role in the decision-making process was also played by the growing risk of a correction on global financial markets, which could cause domestic financial institutions to incur market and credit losses via a deterioration of the situation in the real economy. In the ensuing discussion, Jan Kubíček and Jakub Seidler noted that according to the Department’s analyses, the economy now appeared to be close to the peak of the current cycle, so the cyclical risks should not strengthen significantly. In these conditions, it could be optimal to respond to developments only after new data came in, so that the CCyB rate was not changed too frequently over time (Jan Procházka, Jakub Seidler). Karina Kubelková said the risk of negative consequences due to inaction bias was low, as confirmed by the results of the adverse scenario of the banking sector stress test. She also emphasised that the financial soundness of non-financial corporations and households remained at a good level and default rates in the main credit segments were close to historical lows.

In summary, the board members agreed that despite having increased somewhat, the existing cyclical risks were sufficiently covered by the current CCyB rate. Its next setting would depend primarily on further developments in the property and mortgage markets and on the investment activity of non-financial corporations. The decision would also have to take into account the impacts of setting a universal CCyB rate for different loan portfolios, as the cyclical risks currently differed in intensity in the household sector and the non-financial corporations sector and, by its very nature, the rate has different effects on portfolios with different risk weights (Jakub Seidler).

After the discussion, the Board decided to leave the CCyB rate at 1.25%. All seven board members (Aleš Michl, Eva Zamrazilová, Jan Frait, Karina Kubelková, Jan Kubíček, Jan Procházka, Jakub Seidler) voted in favour of this decision.

Legally binding borrower-based measures

In the part of the presentation on borrower-based measures, it was said that mortgage market activity had increased further amid rising real wages and falling mortgage interest rates. This had been reflected in accelerating year-on-year growth in residential property prices. The rising prices had caused nominal volumes of new mortgage loans to near their 2021 highs, while the number itself had been slightly above the long-term average. The affordability of housing for medium- and low-income households remained substantially worse in Prague and Brno in particular. In this environment, the credit risks in banks’ mortgage portfolios had grown somewhat. However, the growth had not been broad-based but had been concentrated primarily in purchases of residential property as an investment. The risks associated with the debt financing of housing were partly offset by the dominant share of high-income households in the mortgage market, as such households had sufficient financial reserves to absorb macrofinancial shocks. The volume of highly risky loans combining high LTV and DSTI/DTI ratios remained low and did not have the potential to give rise to systemic risks.

The Board’s assessment of the mortgage market situation aligned with the opinion of the Financial Stability and Resolution Department. Despite some growth in risks, banks were not easing their credit standards significantly and the risks being taken on were not across the board in nature. Their overall scale therefore did not require an immediate response in the form of the activation of legally binding limits on the DSTI and DTI ratios. Given the current evolution of property prices, the Board still regarded the application of a legally binding limit on the LTV ratio as desirable, but also as sufficient to counter the rapid accumulation of systemic risks associated with the debt financing of residential property purchases. Jan Procházka said he viewed the DSTI and DTI ratios as suitable tools in an environment of very relaxed credit standards and low interest rates, a subsequent increase in which could trigger a wave of defaults. In his opinion, we were not currently in such a situation, so there was no reason to reactivate them. During the assessment of the situation, Eva Zamrazilová said that some warning price signals were apparent in the market, pointing to longer-term imbalances and the presence of structural risks. These demanded heightened attention. However, the overall assessment was complicated by the relatively opaque investor structure, with institutional investors entering the market more and more often alongside households. She and Jan Kubíček noted that a sectoral capital buffer targeted at property exposures (a sectoral systemic risk buffer) could alternatively be used to cover the risks given their structural nature. However, this step would require a detailed analysis of the potential benefits and costs and the overall procedural complexity

After the discussion, the Board decided to leave the upper limit on the LTV ratio at 80% (90% for applicants under 36 years purchasing owner-occupied housing). All seven board members (Aleš Michl, Eva Zamrazilová, Jan Frait, Karina Kubelková, Jan Kubíček, Jan Procházka, Jakub Seidler) voted to leave the upper limit on the LTV ratio unchanged. The upper DTI and DSTI limits remain deactivated.

Amendment to the Recommendation in the area of borrower-based measures

In its assessment of the systematic risks associated with the debt financing of residential property purchases, the Board stated that although they were not across the board in nature, growth in risks was apparent in some areas. The key segment was that of mortgage loans for the purchase of investment property. Their share in new loans had risen significantly in recent years, while they had been showing riskier levels from the DSTI and DTI perspective. The Board agreed that investment purchases could give rise to higher risks than purchases of owner-occupied housing, especially if their market share were to increase further. In a highly adverse scenario, owner-investors with riskier debt profiles were more likely to default, hence any enforcement of collateral would foster greater property price volatility. A drop in prices would in turn reduce the value of collateral as well as loans financing the purchase of owner-occupied housing.

A majority of the board members expressed the view that the underlying risks were not dramatically elevated for now, but it was appropriate to respond to the situation in good time to ensure that the risks associated with investment purchases did not gather momentum in the future. Given the preventive nature of the measure and the need to target a selected segment, adjusting the upper limits on selected credit ratios via the Recommendation on the management of risks associated with the provision of consumer credit for housing appeared to be the most appropriate instrument. Its advantages included smaller redistribution effects by comparison with a broad-based instrument (Jan Procházka) and relative flexibility in defining investment-motivated purchases compared with statutory regulation (Jan Frait, Eva Zamrazilová). By contrast, Karina Kubelková said that in her view the risks were not currently intense enough to warrant an immediate response to the situation, and there was currently no risk associated with delaying the macroprudential policy response. She also noted that given the many ways investors could adjust to the potential Recommendation, it could not be expected to have an appreciable effect on the market.

The other board members agreed that this measure would have quite a limited impact on the total volume of new mortgage loans provided and on property prices. However, they emphasised that the main motivation for the measure was to reduce the riskiness of new loans for the purchase of investment property (Jakub Seidler) and to preventively suppress further significant growth of their share in total new mortgage loans. This would help make the banking sector sufficiently resilient to the materialisation of related risks.

After the discussion, the Board recommended that providers of consumer loans for housing purposes apply an LTV limit of 70% and a DTI limit of 7 to loans for the purchase of investment residential property. Six board members (Aleš Michl, Eva Zamrazilová, Jan Frait, Jan Kubíček, Jan Procházka, Jakub Seidler) voted in favour of this Recommendation. One member (Karina Kubelková) voted against.

Author of the minutes: Miroslav Plašil, Financial Stability and Resolution Department