Financial accounts statistics – commentary

for 4Q 2020

The overall situation

The total value of the financial assets in the Czech economy declined by 0.9% in Q4. The year-on-year increase (5.3%) matched that in the previous quarter. Financial assets were negatively affected both by non-transaction changes in the form of revaluation and other changes in the volume of assets of CZK -248.0 billion and by a decline in transactions (of CZK -113.5 billion). Financial development were partly affected by commercial banks optimising their balance sheet structures due to regulatory requirements (the Resolution Fund), which is a regular occurrence at this time of the year. The decline in financial assets was due primarily to financial corporations, specifically commercial banks. General government followed a long way behind. The decline in its financial assets was equal to that in the previous quarter. By contrast, the increase in the financial assets of non-financial corporations was extraordinary from the long-term perspective. The financial assets of households continued to grow, but the specific increase was one-third smaller than in the previous quarter. The contribution of the rest of the world was relatively insignificant. The decline in liabilities was also largely due to the financial corporations sector, with commercial banks accounting for 94%. In second place was the rest of the world, though with a much smaller decline in terms of volume. On the other hand, the liabilities of non-financial corporations continued to rise, the growth being more than three times higher than in the previous quarter. Growth in household liabilities was in line with the previous quarter and remains marginal in terms of the total volume of liabilities. The total value of general government liabilities was virtually unchanged quarter on quarter. 

The shares of the individual financial instruments in total financial assets and liabilities recorded bigger changes than in the previous quarter. This was particularly true of deposits, whose relatively large quarter-on-quarter decline (of -6.7%) due to a sharp fall in other deposits (of -20.5%) reduced the respective shares by 1.6 pp and 2.5 pp. The size of the observed shifts between transferable and other deposits was broadly in line with the monitored long-term quarter-on-quarter changes. Growth in the value of shares and other equity (2.7%) led to an increase of 0.9 pp in their share in the financial structure. A rise in the share of loans (of 0.4 pp) is also worth mentioning. The shares of the other financial instruments stayed the same as a quarter earlier. Turning to the sector structure, the share of financial corporations decreased on both sides of the financial balance sheet (by -1.3 pp and -0.9 pp respectively) in favour of non-financial corporations and, in the case of financial assets, households.

Chart 1 Breakdown of financial instruments in the economy
(in %)

Chart 1 Breakdown of financial instruments in the economy

Chart 2 Breakdown of financial assets and liabilities by sector
(in CZK billions)

Chart 2 Breakdown of financial assets and liabilities by sector

The household sector’s net creditor position strengthened again, albeit to a much lesser extent than in the previous quarter. Non-financial corporations and the rest of the world recorded an improvement in their financial positions; in both cases, the rate of improvement was high from the long-term perspective. By contrast, a substantial deterioration in financial position was recorded again by general government and this time by financial corporations.

Non-financial corporations

The value of financial assets increased significantly quarter on quarter (by 3.4%), the growth rate being the highest in five years. The growth was due solely to transactions; the effect of revaluation was negative. Financial assets were affected mainly by an extraordinarily large rise in loans (of 12.8%) and a transaction increase in other equity. The value of transferable deposits increased to a much lesser extent. Liabilities also rose by 1.3% quarter on quarter, like financial assets due mainly to transactions. This was caused largely by an increase in the value of shares and other equity, due to revaluation in the case of listed shares and other equity and to transactions in the case of unlisted shares. Short-term loans and trade credits also recorded a marked transaction rise. The higher growth in financial assets than in liabilities led to a decline in negative net financial assets due to an increase in net lending. The overall effect of revaluation was negative.

The structure of financial assets and liabilities was unchanged. The shares of the individual sectors in the financial assets and liabilities of non-financial corporations remain stable from the counterparty perspective as well. The share of equity capital in total liabilities is also virtually unchanged in the medium term.

Chart 3 Breakdown of financial assets and liabilities of non-financial corporations
(in CZK billions)

Chart 3 Breakdown of financial assets and liabilities of non-financial corporations

Financial corporations

The value of financial assets recorded a pronounced quarterly decline (of -4.2%), due mainly to a decrease in the value of other deposits (of -16.9%). Short-term debt securities, short-term loans and financial derivatives declined in value to a much smaller extent. By contrast, listed securities recorded a transaction increase. The movements in the value of the other financial instruments were negligible. The value of liabilities also declined (by -3.1%); a decline in other deposits (of -20.1%) dominated here as well. In addition, short-term loans and financial derivatives recorded a smaller drop in value. The decline in the value of liabilities was only partly offset by an increase in transferable deposits and short-term debt securities. Negative net financial assets rose significantly, almost solely due to revaluation.

A drop in financial assets (due to revaluation) amid slight growth in liabilities led to a deterioration of the central bank sub-sector’s net financial position. The financial position of deposit-taking corporations except the central bank worsened due to a larger decrease in financial assets than in liabilities. An improvement in financial position was recorded by non MMF investment funds (faster growth in financial assets than liabilities) and other financial intermediaries (a decline in liabilities). Captive financial institutions and insurance corporations saw only a slight deterioration in their financial position amid declines in both financial assets and liabilities. A different trend was observed in the pension funds sub-sector, where the financial position improved due to a larger decline in liabilities.

Chart 4 Shares of sub-sectors in financial assets and liabilities of the financial sector
(in %)

Chart 4 Shares of sub-sectors in financial assets and liabilities of the financial sector

Chart 5 Breakdown of financial assets in selected sub-sectors of the financial corporations sector
(in %)

Chart 5 Breakdown of financial assets in selected sub-sectors of the financial corporations sector

General government

Negative net financial assets recorded a substantial quarter-on-quarter rise in value of 12.7%. The final shape of the financial balance sheet was affected by a decrease in the value of financial assets (of -5.4%). The value of liabilities was virtually unchanged quarter on quarter. The situation was adversely affected by real transactions in both the central government and local government sub-sectors.

The financial assets side was affected mainly by a decline in deposits (of -17.1%), accompanied by contrary movements in transferable and other deposits. The decline in deposits in this period is usual and is linked with the supplementary financing of government financial operations. The fall in other accounts receivable was also extraordinarily large. The decline in financial assets was partly offset by growth in loans and listed shares. The increase in loans mainly reflected Treasury transactions. The value of listed shares rose solely due to revaluation. On the liabilities side, the value of debt securities decreased (by -2.7%) due to the repayment of a large proportion of short-term debt securities issued. Other accounts payable also recorded a slight decrease in value. The decline in liabilities was offset by a pronounced increase in loans (of 19.3%).

Chart 6 Breakdown of financial assets and liabilities of general government
(in CZK billions)

Chart 6 Breakdown of financial assets and liabilities of general government

Households

Net financial assets rose in value by 2.4% quarter on quarter amid growth in both financial assets and liabilities (of 2.2% and 1.7% respectively). Net financial assets were favourably affected mainly by a surplus on financial transactions. The breakdown of financial instruments was unchanged from the previous quarter.

The growth in financial assets was due mainly to an increase in deposits (of 2.9%), which was one of the biggest in a long time. Liquid deposits in the form of transferable deposits continued to rise (4.7%), accounting for 83% of total deposits. The value of investment fund shares increased solely due to revaluation. As regards transactions, a contrary movement between domestic and foreign funds was observed. Investment was again channelled solely into domestic funds, albeit to a lesser extent than in the previous quarter. Listed shares recorded a transaction rise in value. The growth in financial assets was also supported by a strong increase in reserves in pension and life insurance schemes. The value of debt securities was affected by an increase in state saving bonds held by households. The liabilities side has long been determined by loans, whose growth rate was the same as a quarter earlier (1.7%). Deposit-taking corporations except the central bank remain the key lender. Their share in total loans grew to 97%. Turning to the time structure, long-term loans increased and their share in total loans exceeded 98%.

Chart 7 Breakdown of financial assets and liabilities of households
(in CZK billions)

Chart 7 Breakdown of financial assets and liabilities of households

Rest of the world

A decline in liabilities (of -0.9% quarter on quarter) amid virtually flat financial assets (0.1%) led to a pronounced increase in net financial assets (13.5%). The value of net financial assets was positively affected by exchange rate and other price effects, which were partly offset by negative net financial transactions. 

The financial assets side was affected mainly by an increase in the value of debt securities, reflecting a substantial rise in short-term bank debt securities held by non-residents (64.8%). Conversely, government bonds, and to a lesser extent also corporate debt securities, decreased in value. Shares and other equity rose almost exclusively due to revaluation. As in the previous quarter, other accounts receivable were affected mainly by a transaction rise in trade credits provided to non-financial corporations. The overall rise in financial assets was dampened significantly by a drop in the value of deposits due to a decline in other deposits received by commercial banks from abroad (of -29.9%). The decline in loans was due mainly to repayment of some long-term loans by non-financial corporations and all short-term loans received by general government. The value of financial derivatives decreased again due to transaction changes. The decrease in liabilities was due mainly to a fall in the value of debt securities, owing to a substantial reduction in foreign debt securities held by the CNB (of -7.2%). The decline in deposits was due to a relatively significant fall in the CNB´s other deposits abroad and to, a lesser extent, deposits made by commercial banks abroad. The drop in liabilities was offset by a sizeable transaction rise in listed shares and other equity. 

The changes in the values of financial instruments were reflected in the structure of the balance sheet. Under financial assets, the proportion of debt securities and shares and other equity increased mainly at the expense of deposits. On the liabilities side, an increase in shares and other equity led to a decrease in the share of debt securities and, to a lesser extent, deposits.

Chart 8 Breakdown of financial assets and liabilities of the rest of the World
(in CZK billions)

Chart 8 Breakdown of financial assets and liabilities of the rest of the World