In opening remarks at the European Supervisor Education Initiative Conference in Prague, Czech National Bank Deputy Governor Jan Frait said the CNB supports efforts to simplify financial regulation, but argued the priority should be to reduce genuinely complex processes rather than use simplification to lower bank capital requirements. He pointed to the CNB's own deregulatory steps, including the abolition last year of 36 rules in its decrees, among them some reporting obligations, and proposals to the Ministry of Finance to repeal a number of statutory duties for financial market participants. Frait said one area where more regulation is still needed is a sovereign risk tool covering the credit and concentration risks created by banks' holdings of government bonds. In his remarks, very low or zero capital charges on those exposures encourage credit expansion in segments such as mortgages and sovereign debt. He noted that EU work on the regulatory treatment of sovereign exposures was discussed seriously in 2015 and 2016, but ECOFIN did not reach agreement in 2016 and reopening that debate does not appear likely in the near term.
Czech National Bank2026-05-20
Czech National Bank deputy governor backs simplification but calls for a sovereign risk tool for banks' government bond holdings
At the European Supervisor Education Initiative Conference, Czech National Bank Deputy Governor Jan Frait said the CNB backs simplifying financial regulation but warned against using it to reduce bank capital requirements, highlighting the bank’s repeal of 36 decree rules and proposals to remove statutory duties for financial market participants. He argued that extra regulation is needed for a sovereign risk tool to address credit and concentration risks from banks’ government bond holdings, noting that prior EU work on sovereign exposure treatment stalled at ECOFIN and is unlikely to resume soon.