Financial accounts statistics – commentary

for 4Q 2021

The overall situation

The total value of the financial assets in the Czech economy was virtually flat at the previous quarter’s level in 2021 Q4. The quarter-on-quarter decline close to zero (-0.1%) should be interpreted in the context of a high comparison base, which was temporarily deflected by an extraordinary increase in the value of financial derivatives. The year-on-year increase (of 9.6%) indicates a higher growth rate. The current financial situation was partly affected by commercial banks optimising their balance sheet structures at the close of the year due to applicable regulatory requirements (the Resolution Fund). Transactions resulted in the total value of financial assets falling by CZK 78.3 billion. By contrast, non-transaction changes in the form of revaluations and other changes in the volume of assets led to a rise in the value of financial assets of CZK 54.4 billion. The sizeable decline in financial assets was due primarily to financial corporations, specifically commercial banks. The financial assets of non-financial corporations also fell substantially. By contrast, other economic sectors recorded an increase in the value of their financial assets. This was particularly true of general government and the rest of the world. They were followed a long way behind by households, whose financial assets recorded one of the lowest increases from a long-term perspective. A similar trend could be seen on the liabilities side. The biggest quarter-on-quarter decline was again recorded by financial corporations and commercial banks in particular, followed by non-financial corporations. By contrast, the liabilities of general government rose substantially, and those of the rest of the world also increased (to a lesser extent). These sectors were followed some way behind by households, whose nominal contribution fell slightly quarter on quarter.

The shares of the individual financial instruments in total financial assets and liabilities recorded considerably smaller changes than in the previous quarter. The biggest change was recorded by deposits, whose relatively large quarter-on-quarter decline (of -4.5%) due to a sharp fall in other deposits (of -17.6%) caused their share to drop by 1.1 pp and 2.0 pp. The size of the observed shifts between transferable and other deposits is broadly in line with the monitored long-term quarterly changes typical of the fourth quarter of the year. Within other financial instruments, the loans recorded an increase in their share (up by 0.6 pp), as, to a lesser extent, did listed shares and short-term debt securities (both up by 0.3 pp). Turning to the sector structure, the share of financial corporations decreased on both sides of the financial balance sheet (by 0.4 pp and 0.6 pp respectively), as did the share of non-financial corporations (by 0.3 pp), in favour of general government and the rest of the world. 

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 net financial position of financial corporations improved again. The net financial position of the rest of the world continued to rise, albeit to a much lesser extent than in the previous quarter. By contrast, the net financial position of other economic sectors weakened. The negative net financial assets of non-financial corporations increased for the third consecutive quarter. However, the current growth rate was much lower in quarter-on-quarter terms. Following a temporary improvement in the financial position, the negative net financial assets of general government increased slightly again. The quarter-on-quarter decline in net financial assets of households is an isolated phenomenon from a long-term perspective.

Non-financial corporations

Financial assets dropped in value by 2.0% quarter on quarter. The decrease was due mostly to a fall in the value of financial derivatives of 13.9% due to transactions. Debt securities, loans, shares and other equity and other accounts receivable declined to a much smaller extent. The drop in financial assets was only slightly offset by a rise in deposits. A similar trend could be seen on the liabilities side (-1.0%). As in the case of assets, financial derivatives recorded the biggest decline (down by 13.1%), followed by other accounts payable and debt securities. By contrast, shares and other equity picked up due to revaluation. The sector’s negative net financial position deepened further despite positive net financial transactions. However, the latter were outweighed by a negative effect of price changes.  

The share of currency and deposits in total financial assets rose to almost 19% amid a decline in the share of financial derivatives. The share of equity in liabilities picked up by 1.3 pp. As regards debt items (debt securities and loans), the share of long-term debt fell slightly and the share of short-term debt increased.

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 declined by 1.2% in Q4 following a marked rise in the previous quarter. A particularly strong quarter-on-quarter decrease was recorded for other deposits (-17.0%). Other items except other accounts receivable recorded an increase in value. This included above all financial derivatives as well as shares and other equity. Total liabilities also decreased (by -1.6%). As on the financial assets side, this was due primarily to a drop in other deposits. The sector’s net financial position improved quarter on quarter.

Slower growth in financial assets than in liabilities led to a deterioration in the net financial position of the central bank. By contrast, faster growth in liabilities than in assets (especially with regard to deposits on both sides of the balance sheet) was reflected in an improvement in the position of deposit-taking corporations except the central bank. The financial position of insurance corporations deteriorated mainly on account of a rise in other accounts payable. The financial position of other financial intermediaries turned negative owing to a decrease in the value of equity and deposit holdings. The financial position of non MMF investment funds improved slightly. By contrast, the captive financial institutions sub-sector recorded a substantial improvement owing to a rise in the value of shares and other equity on the financial assets side. The pension funds sub-sector recorded faster growth in financial assets (especially debt securities and loans) than in liabilities, and in turn an improvement in its financial position.

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

Financial assets and liabilities increased significantly in value by 6.7% and 6.2% quarter on quarter respectively. The sector’s debtor position deteriorated slightly, due to developments in the local government and social security funds sub-sectors.

Growth in short-term loans of 42% affected the financial assets side, reflecting mainly Treasury operations within the sector, so the impact on the liabilities side was similar. The value of listed shares rose solely due to revaluation. An increase in the value of deposits was accompanied by contrary developments in transferable and other deposits (78.3% and -84.6% respectively). At the same time, the sub-sector allocation of deposits changed. The volume of deposits with commercial banks fell markedly in favour of short-term deposits with the CNB.  The growth in financial assets was offset by a decrease in the value of other equity, due solely to revaluation. Similarly, the liabilities side was primarily affected by an increase in short-term loans, driven by a rise in loans as part of shifts between sub-sectors. Other accounts payable also recorded a substantial increase in value. Owing to sizeable negative revaluation of long-term bonds held by the rest of the world, the total value of debt securities picked up only slightly.

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

A substantially stronger quarter-on-quarter decrease in financial assets than in liabilities was reflected in a slight decline in net financial assets of 0.4%. Net financial assets were unfavourably affected by net financial transactions, which were only partly offset by financial asset revaluation.

The increase in financial assets of 0.4% was aided by an increase in the value of shares in investment funds. Investment was again channelled into both domestic and foreign funds. Relatively high transaction increases were observed for the third consecutive quarter. However, returns on accumulated funds in investment funds also rose markedly compared with the previous quarter. The growth rate of other accounts receivable was unchanged from the previous quarter. The growth in the value of financial assets was also supported by an increase in reserves in pension schemes. The total value of shares and other equity remained broadly unchanged quarter on quarter.  A drop in long-term investment in corporate bonds and to a lesser extent also bank bonds was reflected in a decrease in the value of debt securities (-13.2%). Deposits also slightly decreased in value by 0.3%. Although this represents a marginal decline in absolute terms, it is a unique phenomenon in the history of the compilation of financial accounts. At the same time, an atypical change in the term structure of deposits was recorded, with a decline in liquid deposits in the form of transferable deposits being accompanied by a significant increase in other deposits that was completely unique from the long-term perspective (12.9%). The quarter-on-quarter drop in the growth rate of liabilities (2.7%) was due to slower growth in loans provided, i.e. the predominant liability item. Despite this slowdown, the current growth rate of loans (2.5%) is above the long-term average. Deposit-taking corporations except the central bank remain the key lender (with a share of 97%). The breakdown of loans was also virtually unchanged quarter on quarter, dominated by long-term loans (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

Financial assets and liabilities increased in value by 1.5% and 1.3% respectively quarter on quarter. This was reflected in a slight improvement in the sector’s net financial position. Net financial assets were positively affected by net financial transactions, which was partly offset by exchange rate and other price effects. 

A significant transaction increase in short-term debt securities of commercial banks held by the rest of the world was recorded on the financial assets side (41.8%). Loans recorded the second-highest growth in volume, due mainly to an increase in loans to non-financial corporations as well as short-term loans to general government. Other accounts receivable were affected by a transaction increase in trade credits to non-financial corporations. The value of listed shares and other equity picked up due to revaluation. The total growth in financial assets was dampened mainly by a transaction decline in financial derivatives. A decrease in the value of long-term debt securities was due to lower investment in corporate issues and a drop in market prices of government bonds. A decline in total deposits reflect the fact that other deposits received by commercial banks from abroad recorded a decrease which was only partly offset by a rise in other deposits with the CNB. The liabilities side was affected most of all by a rise in deposits due to an increase in the CNB’s transferable deposits abroad. Furthermore, shares and other equity as well as loans recorded an increase in value. Like financial assets, liabilities were negatively affected by a transaction decrease in financial derivatives. A drop in the value of debt securities was due to a transaction decline in foreign short-term debt securities held by the CNB.

The changes in the values of financial instruments were reflected in the structure of the balance sheet. On the financial assets side, the proportion of debt securities and loans increased at the expense of deposits and financial derivatives. On the liabilities side, growth in the proportion of loans and deposits was reflected in a lower share of financial derivatives and debt securities.

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