E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: GeneralReturn

The article, in general terms, describes the sovereign risk and the risk of excessive concentration of sovereign exposures within the balance sheets of the banks. Based on an analysis focused on the development of this phenomenon within the given period, both in the Czech Republic and in other selected countries, the rate of effectiveness of the Czech central bank's position towards this potential source of financial instability was assessed. Mutual interconnection of the banking sector and the state is percieved as significant and potentially risky. The reasons are related to many interconnections that may adversely affect the stability of one or both sectors, in case of adverse changes, with an overlap into the real economy. The article highlights the main sections of mutual relationships between the state and the banking sector, trying to clarify them. Further, identifies the relevant sources of instability, that are being discussed.