Dear Colleagues,
The first Advent is now just a memory and many locations are now even covered by the first snow.  Although the information we are getting lately is not too positive, it is these little things that we should rejoice in. The coming Christmas should be the holidays of peace and, above all, the season of family happiness. Spending it with the people you love is worth more than any gifts. Therefore, if you can, try to slow down your often exhausting pace of work and enjoy your time among your loved ones. We will try to relieve you from the rush of daily events by gathering information in the CBA NEWS that you might find interesting and that you should not miss. Today, we have focused on the CNB's decision to tighten mortgage lending, we have looked at how Czechs are spending at Christmas, what legislation is likely to be adopted before the end of the year, as well as at how this year's eighth year of the CBA's "Bankers Go to Schools" project went. Despite the epidemic situation, the participation of both banks and schools was record-breaking and the feedback from all sides was very positive. This was the news that warmed our hearts and gave us energy for the years to come. There should be as much positive news as possible, especially at this time.
Enjoy the last 30+ days of this year and remember that holidays are best when they are peaceful and spent in the midst of one's happy family.
Monika Zahálková Monika Zahálková,
CBA Managing Director
Monika Zahálková, výkonná ředitelka ČBA

CNB tightened rules for mortgages

Last week, the Czech National Bank tightened the parameters for mortgage lending, both the LTV ratio and the DTI and DSTI income ratios, which it has abolished with the arrival of the pandemic in the first half of 2020. The reason for the CNB's steps is primarily its effort to ensure that there are no excessive risks in the balance sheets of the banking sector, which could threaten its stability over time. The new parameters will apply from April next year, but the CNB encourages intermediaries to make an attempt to comply with the ratios at once.
The CNB has reduced the loan-to-value (LTV) limit from 90% to 80%, which increases the need for own funds to 20%. In addition, the CNB has reintroduced the income limits that it had abolished with the arrival of the pandemic: it has set the DTI (debt-to-income) parameter at the value of 8.5, i.e., the total amount of credit (debt) of the applicant should not exceed 8.5 times his/her net annual income. Prior to the arrival of the pandemic, the CNB recommended not to exceed a DTI of 9 times, however, it generally considered a value above 8 to be risky. The DSTI (debt-service-to-income) parameter - i.e., the size of the monthly repayment(s) of the loan(s) relative to the net income of the applicant - should not exceed the level of 45%. However, loans with a DSTI above 40% are generally considered risky by the CNB. In all cases, lenders may exceed the limits by up to 5% of new production, with softer limits for applicants under 36 years of age (9.5%/50%/90%). "The CNB's decision is not so much of a surprise, as there has been speculation about tightening these parameters for some time, and the situation is thus largely returning to pre-pandemic levels, when the CNB only had recommendations at its disposal, not the law. However, the reasons for tightening macroprudential policy are not related to the CNB's efforts to correct the housing market, but to prevent the banking sector from providing more risky loans that could reduce its resilience and stability in the future," explained Jakub Seidler, the Chief Economist of the CBA.
In addition to tightening mortgage lending rules, the CNB is also continuing to tighten credit conditions through capital requirements. This year, it has increased the countercyclical capital buffer for the third time. Its current level is 0.5%, but it will be applied at 1% from 1 July 2022, at 1.5% from 1 October 2022 and at 2% from 1 January 2023. Banks will thus have to hold more capital for loans granted in the Czech Republic over time, making lending somewhat more expensive. However, the banking sector has sufficient capital held in excess of the minimum requirements, so the new rules should not affect the credit market too much in this respect. 


Using a hat to pay? Soon, maybe a reality....

Is the end of cash and credit cards coming? Will we pay with rings, caps or jackets? In the next issue of the CBA Focus, Tomáš Hládek, the staff support for the Payment Systems Commission of the Czech Banking Association, Michal Čarný, the CEO of MasterCard for the Czech Republic and Slovakia and Tomáš Fíla, the CEO of Fintech Finbricks, talk with Daniela Písařovicová, the host, about what payment methods we will use in the future, what fintech innovations are in play and how important security is when paying. Watch it on our YouTube channel or listen to it on Spotify.

Inflation fears increase further, they are the highest in the past 20 years

Confidence in the Czech economy further diminished in November, especially among households. Households are evidently worried about inflation, weaker economic growth and the deterioration of their own financial situation. Concerns about inflation are the highest in the past 20 years. Among entrepreneurs, confidence was boosted in particular by developments in industry, which is probably related to a faster-than-expected relaunch of car production last month. Confidence also rose slightly in the construction sector.  

Czechs spend an average of CZK 12 700 on Christmas. Every tenth person will borrow money for presents.

Even the long-lasting pandemic has not changed the Czechs' appetite for Christmas spending. This year, they plan to spend an average of CZK 12,700 on shopping. The biggest part of the Christmas budget will be spent on gifts and food, while the least will be spent on Christmas decorations. The prevailing uncertainty has not affected the Czechs' decision to borrow money for presents. This year, approximately one tenth of respondents plan to do so. On average, they plan to borrow CZK 10,600. This is despite the fact that 95% of people think that borrowing for Christmas presents is generally not a good idea. This was indicated by a recent survey conducted by the Czech Banking Association (the CBA).

The CBA and the Police of the Czech Republic have signed a Memorandum of Cooperation

In mid-November, senior representatives of the Police of the Czech Republic and of the Czech Banking Association (the CBA) signed a Memorandum of Mutual Cooperation. They have thus declared their joint interest in protecting banks and their clients from all forms of cybercrime committed in the banking sector. Mutual exchange of relevant and timely information on the types and methods of attacks carried out and on the current trends is a fundamental tool for joint action. The agreement on joint training and prevention activities is also worth mentioning.  

The first three banks are launching SIGN, the guaranteed digital signature

Contracts and documents can now be signed with the banking identity. The BankID SIGN service, i.e., a guaranteed signature of a contract or document in PDF format, has been launched by three banks - Česká spořitelna, ČSOB and Komerční banka in mid-November. The BankID Sign authenticates the client through the banking identity, which is a positive identity verification, and then creates a one-time signature certificate for the client. The client then signs the required contract or document with it.

The European Commission has adopted a further amendment to the Temporary Framework to support economic recovery in the context of the coronavirus pandemic

Approximately in mid-November, the European Commission approved the prolongation of the State aid Temporary Framework until the end of June 2022. The COVID III and COVID Plus guarantee programs in the Czech Republic were based on its rules, among others.  In addition to moving the date, two new measures were introduced, namely the investment support measure and the solvency support measure. The new instruments should help further accelerate the economic recovery and revitalize the European economy.

ESMA published its 2020 annual report on the EU market abuse sanctions 

The European Securities and Markets Authority (ESMA), the EU's securities markets regulator, published its annual report on administrative and criminal sanctions last week, as well as other administrative measures issued across the European Union under the Market Abuse Regulation (MAR) in 2020.  The Report found that National Competent Authorities (NCAs) and other authorities imposed a total of €17.5 million in fines related to 541 administrative and criminal actions under MAR. The report shows that national competent authorities and other authorities imposed a total of €17.8 million in fines related to 541 administrative and criminal proceedings. The Czech Republic is one of the countries where no penalties were imposed.

Z legislativy

Draft laws prepared earlier by the Ministry of Finance will be referred to the new Chamber of Deputies

According to available information, the Ministry of Finance is ready to send probably all the bills it had prepared, and which the previous Chamber did not have time to discuss, to the Chamber of Deputies. This would relate to both the government's draft law amending certain laws in connection with the capital market development (formerly Parliamentary Print No. 1117), but also to the government bill in connection with the development of the capital market (formerly Parliamentary Print No.  993), to which a proposal for an amendment on early repayment of mortgages has been applied in the past. This could happen at the beginning of December 2021. Priority will be given to transposition prints (such as Parliamentary Print No. 1117), which the Ministry of Finance will probably propose to be discussed in an accelerated procedure, as in some cases the transposition deadline has already expired and there may be a risk of sanctions from the European Commission. Parliamentary Print No.  993 will probably not have such priority as it is not transposing legislation. It will therefore probably not be discussed until next year.  

Please find information on the approved CBA codes and standards here.

In-person examinations for vaccinated participants only, distance exams for all

Due to the new restrictions which became effective on November 22, 2021, persons who are not fully vaccinated or who have not had COVID-19 disease within the last 180 days are not allowed to take face-to-face exams. Anyone who does not meet the requirements for attending a face-to-face exam may register for a distance exam date with us. We are adding new dates at the CBA EDUCA, there are plenty of them for everyone.  


Bankers again headed off to schools after one year

The eighth year of "Bankers Go to Schools", the Czech Banking Association's financial education project, recorded record interest from schools and lecturers after a one-year COVID break. This year, more than 110 bankers headed off to schools and gave lectures to approximately 4,500 pupils and students from all regions of the Czech Republic. We talked to Andrea Machálková, who is in charge of the Bankers Go to Schools project at the CBA, about what attracts schools and students to this project, how bankers coped with all the questions and about how is today's youth doing in the area of financial literacy.

This year marked the eighth year of "Bankers Go to Schools", the Czech Banking Association's financial education project. What exactly is it?
Bankers Go to Schools is an educational project of the CBA, which aims to introduce pupils and students aged 15-16 to the basics of financial literacy. The project was launched in 2013 and initially featured only the leaders of Czech banks as speakers. Very quickly, however, interest from schools demanded the involvement of more speakers, and so other banking specialists took on this role as well. Technological developments in banking were also reflected in extending the lectures to include the topic of Cyber Security. Currently, schools participating in the project can therefore choose whether they want to organize a two-hour lecture on Financial Literacy or on Cyber Security for their students.
What made the difference this year?

This year, the project was still in the shadow of the covid pandemic. However, unlike the previous year, when schools were not yet sufficiently prepared for distance learning and many of the lectures which had been agreed did not take place in the end, this year was more favorable in this respect. Where it was not possible to present an arranged lecture at the school in person, the lecture was moved to an online environment or an alternative date was arranged and the lecture was held later.  

How do pupils and students approach bankers' lectures? Do they find them interesting or is it just another obligation they have to comply with?

This year, it was the first time that I have organized the “Bankers” and I was very pleasantly surprised by the positive feedback from both the teachers and their pupils or students and from the lecturers. Basically, both parties are enthusiastic about participating in the project. The children and the teachers mostly because they have the opportunity to meet an expert in the field who will introduce the topic in an engaging way, the lecturers are pleasantly surprised by the friendly and interested audience.

And how are pupils and students doing in terms of financial literacy? Is it a big unknown or do they move in it easily like a fish in water?
It's similar to the majority population. The financial literacy of the Czechs, according to the “CBA Financial Literacy Index”, is still lagging behind, and this year it has even fallen slightly to 55 points, bringing it down to the level of four years ago. Younger people, who do not have enough personal experience on which to base their financial education, consistently score worse. Personal experience is one of the important criteria for developing financial literacy. That is why the Czech Banking Association organizes the Bankers Go to Schools project, which is gaining more and more supporters every year.

Which banks have joined the project this year and which of the bankers have visited schools?

I would like to highlight here the excellent cooperation with our member banks. This year, a total of 16 banks have joined the project, namely: Air Bank, Česká spořitelna, Commerzbank, CREDITAS, ČSOB, Equa bank, Expobank CZ, Hello bank!, ING, Komerční banka, mBank, Modrá pyramida, MONETA Money Bank, PPF Banka, Trinity Bank and UniCredit Bank. It is fine to see not only the number of volunteers - bankers of various specializations - but also the continued interest of the top managements of the banks participating in the project. Schools thus welcomed the members of the boards of Česká spořitelna, Komerční banka, Modrá pyramida and MONETA Money Bank in their premises.

Is there anything you could emphasize that really worked well this year? And on the contrary - what could be done better and what would you like to change/improve next year?

The online Cyber Test, which the CBA introduced to the public in July of this year, was very well received and we also included it in the lectures. The audience was able to test their acquired knowledge about online threats and how to counter them live. We are aware that the lectures are very information-intensive, and we will have to focus on that. At the same time, we will need to supplement the lectures next year with other topics that we know are of interest to the audience. These include, for instance, investments, digital currencies, the banking identity and modern forms of banking - mobile banking, payments with a smartwatch, etc.

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