* Czech central bank plans capital surcharges without
* Says vast majority of banks can meet new requirements with
* Plans 1-3 pct systemic risk capital surcharge for 4 banks
* Not planning counter-cyclical capital requirement in the
next 2 years
By Jan Lopatka
PRAGUE, Oct 21 The Czech central bank plans to
slap additional capital requirements on four lenders key to the
country's banking system but will not implement all capital
buffers possible under a new European regulatory framework, a
central banker said.
New capital rules have been adopted by the European Union to
boost bank defences following the financial sector crisis in
recent years and will be implemented gradually as of next year.
Under the rules, all banks will have to hold capital in
excess of the current 8 percent of risk-weighted assets, and
national regulators have the right to make selected banks hold
The Czech central bank will place a mandatory 2.5 percent
additional capital conservation buffer on all banks without any
phase-in period next year, as soon as required legislation takes
effect, Vice-Governor Vladimir Tomsik said.
It has also chosen the four most important banks that will
have to set aside a "systemic risk buffer" worth an additional
1-3 percent of risk-weighted assets, also from some time next
year, he said.
"We're not going at full throttle. We could demand an even
higher level of reserves," Tomsik told Reuters and daily
"We are not looking at this in a binary way, we have a
graduated approach," he said of the systemic risk buffers.
Tomsik did not name the four banks that will have to hold
the systemic risk buffer but said they would be revealed once
the legislation is adopted.
The country's four largest banks are Erste's Ceska
Sporitelna, KBC's CSOB, Societe Generale's
Komercni Banka and UniCredit. The
fifth is GE Money.
The buffers will have to be covered by the highest quality
capital, called Common Equity Tier 1.
Tomsik said the central bank will not, at least for the next
two years, order banks to create another reserve that may be
required under the new rules, called the anti-cyclical buffer,
which should be applied at times of faster credit expansion.
Czech banks have survived the crisis without any need for
bailouts, thanks to their strong profitability and lack of
investments into assets later labelled as toxic, such as
securities backed by high-risk mortgages.
The "vast majority" of banks representing a dominant part of
the banking sector will be able to cover the new requirements
from their existing capital. In case more capital is needed, it
can be built up gradually by retaining profits, Tomsik said.
The average capital adequacy ratio in the banking sector was
17.6 percent in June, with high-quality capital called Tier 1 at
17.3 percent, high compared with most European banking systems.
"We want to maintain the current capital adequacy in the
banking sector. We do not want to allow it to fall from the
current level only to rise again later," Tomsik said.
Komercni Banka's Chief Operating Officer Pavel Cejka told
Reuters last month he expected to maintain the bank's dividend
payout ratio of 60-70 percent of profit under the anticipated
new rules, but the new regulations could become a burden if the
bank's loan portfolio expands substantially in the future.
The central bank said it would frequently re-evaluate the
applied capital requirements.