The Czech National Bank published minutes of its Bank Board meeting on financial stability showing that the board raised the countercyclical capital buffer by 0.25 percentage point to 1.50% after concluding that the domestic economy was moving further into the growth phase of the financial cycle. At the same meeting, it left the systemic risk buffer at 0.5%, kept the binding loan-to-value cap at 80% and 90% for applicants under 36 buying owner-occupied housing, and left the debt-to-income and debt service-to-income limits deactivated. The increase in the countercyclical buffer was driven by broad-based credit growth, rising household and non-financial corporate indebtedness, continued residential property price growth, lower loan-loss provisioning coverage, declining average risk weights and very low non-performing loan ratios, which the board saw as potentially encouraging over-optimistic perceptions of credit risk. The board said banks' voluntarily held capital and solid profitability meant the higher buffer should not materially affect lending to the real economy, while also noting that geopolitical risks and supply shocks could still worsen conditions and that the buffer could be released if needed. Structural vulnerabilities were judged to remain material because of the economy's openness and concentration, with additional concern around cyber risk, artificial intelligence-related risk and the growing role of the non-bank financial sector. On the mortgage market, newly negotiated loan numbers were above the long-term average in early 2026 and volumes exceeded 2021, partly because borrowers brought forward lending before lenders began applying the recommendation on loans for investment property, but the board did not see a broad easing of credit standards and noted continued compliance with binding loan-to-value limits. Board members said they would reassess over time whether the recommendation on investment property lending has reduced mortgage portfolio risk as intended and whether the current calibration of borrower-based measures remains appropriate, including in comparison with other European Union countries. The minutes also indicate that reactivation of the debt-to-income and debt service-to-income caps could become necessary if credit standards were to ease persistently to levels implying materially higher systemic risk.
Czech National Bank2026-06-04
Czech National Bank raises countercyclical buffer to 1.50% and leaves systemic and mortgage measures unchanged
The Czech National Bank's Bank Board raised the countercyclical capital buffer by 0.25 percentage point to 1.50% after judging that strong credit growth and rising property prices show a further move into the growth phase of the financial cycle. It kept the systemic risk buffer at 0.5%, left the loan-to-value cap unchanged at 80% and 90% for younger owner-occupiers, and kept debt-to-income and debt service-to-income limits deactivated. The board said mortgage activity had increased without broad easing of credit standards, but it will review the effect of its investment property lending recommendation and the case for income-based caps.