Czech banks survive follow-up to European stress test

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Photo credit: Jay Lee

Czech banks have been declared healthier than their
counterparts on the continent after the country’s central bank performed checks
on the republic’s finances this week.

The examination, which followed the recent European stress test,
found reassuringly positive results, with Czech banks remaining higher than the
minimum capital adequacy of 8 per cent even in the worst case scenario.

Banks “remain stable”

“The banking sector as a whole remains stable in the
baseline scenario and in the stress scenario and its aggregate capital adequacy
ratio stays above the regulatory minimum of 8 percent and does not even fall
below 10 percent,” the central bank told Reuters.

The report found that Czech banks would survive even if
conditions fell to the worst projected scenario of a two-year recession, which
would see property prices fall 30 per cent and 28 billion Czech crowns written
off.

Urgent
recapitalisation?

The report follows remarks from the International Monetary
Fund that EU banks urgently need to be recapitalised. However, some countries,
such as France, rejected the IMF chief’s claims.

“Either she had been misinformed by her staff at the
IMF – that’s a possibility – or she did not have French banks in mind,” the
Bank of France governor told French
television station BFM. “French banks, in particular, but it’s also
true of the European banking sector generally, are solid and well capitalized.”

While the Czech report offers hope following July’s European stress test, the
Eurozone countries continue to take necessary steps to recover their deficits
and reassure investors.