Page 48 - CE Outlook Regions 2022

3.1.2 Banks

The CBN increased the counter-cyclical capital buffer rate at the end
of 2021 to 2% with effect from 1 January 2023. In the event of a
further acceleration of credit growth, raising risks in the banking
sector’s balance sheet, and causing rising vulnerability in the
banking sector, the CBN board said it is ready to increase this rate
further. On the other hand, should the economic situation worsen
substantially and risks materialise, it is ready to gradually lower the
rate or release the buffer fully.

The capitalization of the Czech banking sector remains very robust
thanks to capital buffers and capital surpluses in excess of the
regulatory requirements. The capital ratio will decrease gradually in
the years ahead due to an outflow of retained dividends. Czech
banks currently have met the overall capital requirement by a
sufficient margin.

As CNB showed in its forecast, the Czech financial sector has
increased its resilience to adverse shocks in 2021. However, the
level of uncertainty about the future course of the pandemic and the
economy remains high. It requires financial institutions to act very
prudently in the management of balance sheets, risks and capital as
well as in dividend policies.

3.1.3 Industry

According to the CNB, the export-oriented Czech economy and
especially its automotive industry will face temporary production
shutdowns in the coming quarters. Even after car production
resumes at the start of 2022, this sector and the whole of industry
will remain limited by component shortages for most of 1H22.

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