Czech banks sheltered from financial crisis, says central bank

Many in the Czech Republic have watched the turmoil on the global financial markets with unease, especially as the crisis spread to affect a number of yEuropean banks. But what about the banking sector in the Czech Republic? Should Czechs be worried about similar problems developing here?

Photo: CTK

Analysis and evaluation of the situation on the Czech financial markets, the Czech National Bank said on Tuesday, has revealed “no cause for concern”. According to the institution, Czech banks - prime players on Czech financial markets - are at little risk of being buffeted by the global financial crisis. The reason? The conservative business model followed by Czech banks; the central bank has noted it has minimised exposure to risky assets. The head of Komerční banka, for example, made clear it had no exposure to US securities or US banks, a similar situation for other large Czech banks. Vladimír Pikora, an analyst for Next Finance, agrees the situation in the Czech Republic is different from some other EU countries where some banks have been hit hard.

“The Czech money market has remained resilient and we haven’t seen any trouble so far. The Czech money market is still in better shape than abroad. The reason is that the country still has its own currency and its own market and if there is any turbulence, the Czech Republic can stand it. By contrast, if we were a part of the eurozone we would be exposed directly to money market problems of the euro area. As it stands, the Czech money market has been unaffected by the credit woes and the market doesn’t require any special measures at this time.”

Vladimír Pikora

Nor does ownership by foreign banks, says Pikora, put Czech banks at risk. He stresses they are separate institutions, saying he did not expect they would send money abroad and suffer a lack of funds. Instead, he sees potential problems elsewhere.

“The main problem right now is that it seems that there is some kind of heightened risk-aversion and it could keep some investors from investing in regional markets. We could see a lack of new money in the economy. However, I do not expect that banks would be affected or that there would be any problems. For sure, the economy will slow as a result, but on the other hand, this was forecast and expected even without the financial crisis.”