Czech National Bank raises countercyclical capital buffer rate to 1.5% for banks and credit unions from 1 July 2027

The Czech National Bank has issued a general measure raising the countercyclical capital buffer rate for the Czech Republic by 0.25 percentage points to 1.5% of total risk exposure amount. Banks and credit unions must apply the new rate when calculating the combined buffer requirement from 1 July 2027. The increase reflects the CNB’s assessment that cyclical systemic risk has become broad-based and that the economy has moved further into the expansionary phase of the financial cycle. It pointed to strong growth in new lending to households and non-financial corporations, rising indebtedness, brisk residential property price growth and above-average property market activity. The CNB’s updated estimate put unexpected cyclical credit losses at CZK 27.3 billion and the capital needed to absorb a cyclical rise in risk weights at CZK 28.5 billion, for a total of CZK 55.8 billion, equivalent to a 1.78% buffer rate. Although the standard credit-to-GDP guide implied a 0% benchmark rate and the additional gap implied 0.25%, the CNB said it relies on a broader assessment of systemic risk indicators. The measure takes effect upon publication, replaces the previous Czech countercyclical buffer provisions and remains in force until amended. The Bank Board said it stands ready to increase the rate further if credit growth and indebtedness continue to strengthen, or to lower or fully release the buffer if economic conditions deteriorate markedly and significant unexpected cyclical credit losses emerge.