Organisational arrangements for banking supervision
Banking supervision was mentioned in Act No. 130/1989 Coll. on the State Bank of Czechoslovakia as one of the functions of the central bank, but its content did not correspond to the true conception and purpose of banking supervision, namely the systematic reduction of the risks inherent in banking and the protection of the safety and soundness of the banking sector. The gradual development of expertise and intensive negotiations with international institutions led to an identification of shortcomings in the existing legislation and an awareness of the lack of institutional arrangements for activities which directly concerned the exercise of banking supervision, together with an awareness of the importance of its proper functioning.
The need to establish standard banking supervision found increasing support within the CSSB. One reason was that the Federal and Republican Ministries of Finance displayed practically no interest in developing state oversight, which was at that time represented by just one institution whose role it was to supervise the activities of banks and savings banks. In 1990, the CSSB therefore commenced steps to establish banking supervision, with the aim of filling the clear gap in the newly established institutional structure for the market economy. The main reasons at that time for bringing banking supervision within the CSSB were its regular contacts with banks, its material and technical arrangements, the possibility of developing automation and information technology, and the limiting of political influences.
At the same time, so that the CSSB could meet the essentially formal requirements of Act No. 158/1989 Coll. on Banks and Savings Banks for licensing new banks, it created the first set of requirements for bank founders. These requirements corresponded to the level of knowledge at the time and included requirements for depositing capital of at least CZK 50 million, the submission of draft founders' deeds and business plans, the inclusion of persons with banking expertise in the management (at the start of the transformation process, when experience in banking under the previous regime was at the very least debatable, this requirement was not always realistic), for the organisation of the bank, etc. Checking individual founders' compliance with these requirements was already complicated at the stage of assessing a project for a new bank, particularly with respect to the origin of funds for paying up capital, the evaluation of founders and their relations, etc. Moreover, once a bank had started up, the CSSB had no further powers to check its activities.
The banking sector
Under these terms, in addition to the five existing state banks, thirteen new banks 1 were established that year in the Czech Republic, with the CSSB issuing licences after agreement with the Federal and Republic Ministries of Finances. Of those thirteen, nine had Czech capital and four had foreign ownership. As the new private banks were launched on what was in essence a monopolistic market and with no funds of their own, the CSSB provided them with refinancing credits to allow them to commence operations.
Data on the founding of banks in individual years in the text of this report is based on data on the provision of licences, i.e. this data maydiffer from the number of banks active at that time.