PRAGUE Dec 12 The Czech banking sector remains
resilient to adverse economic shocks, the central bank's
semi-annual stress tests showed on Monday.
Czech banks have gone through the global financial crisis
without any need for public funding, and have retained high
capital ratios and profits have held up despite falling interest
"The capitalisation of the sector as a whole would remain
above the regulatory minimum of 8 percent even in a stress
scenario assuming a hypothetical sizeable decline in economic
activity in the Czech Republic and abroad," the central bank
"The sector's resilience is based mainly on its high capital
ratio, which stood at 17.7 percent at the end of September 2016,
and on its robust profitability."
The central bank's baseline risk scenario expected economic
growth remaining at around this year's of 2.8 percent in the
next two years.
An adverse scenario saw a downturn driven by a drop in
external demand, causing domestic recession.
This would lead to doubling of non-performing loan ratios
for companies and households, and bank profits would fall by
about 40 percent relative to 2015.
One bank would need some 400 million crowns ($15.71 million)
in fresh capital under the baseline scenario.
Under the adverse scenario, the banking sector aggregate
capital ratio would drop below 13 percent, and eight banks
making up 13.5 percent of the sector would need extra capital of
about 8.6 billion crowns ($337.69 million), or 0.2 percent of
gross domestic product, to reach 8 percent capital adequacy.
The bank said earlier on Monday it left its counter-cyclical
capital buffer for banks at 0.5 percent.
($1 = 25.4670 Czech crowns)
(Reporting by Jan Lopatka; Editing by Jan Schmidt)