PRAGUE, May 23 (Reuters) - The Czech National Bank (CNB) on Thursday raised the countercyclical capital buffer (CCB) for banks’ capital reserves by 25 basis points to 2.00%, lifting the rate for the sixth and what could be the final time.
The Czech Republic is among a handful of European countries that have the extra buffer rate on banks as the central bank seeks to control mortgage lending amid sharp house price growth.
The rise to 2.00% takes effect July 1, 2020, and the central bank said the banking sector had space for credit growth after the increase, assuming reasonable dividend policies.
“Given that the domestic economy is probably close to the peak of the financial cycle, the likelihood of a further increase in the countercyclical buffer rate has decreased significantly,” it said.
The buffer rate now stands at 1.25% and will rise to 1.50% from July, then to 1.75% from January 2020 before Thursday’s decision takes effect.
As part of its discussions on the buffer, the bank also said on Thursday the overvaluation of apartment prices increased slightly last year to 15%, from around 10% the previous year.
The bank decided to maintain current limits on its mortgage lending recommendations, including a loan-to-value ratio of 90% and a maximum of 15% of loans with LTVs of 80-90%.
Recommendations on maximum levels of mortgage borrowers’ debt and debt servicing to income ratios also remained unchanged. (Reporting by Robert Muller and Jason Hovet)