G28 - Financial Institutions and Services: Government Policy and RegulationReturn

The article deals with the issue of TLAC and MREL capital requirements as a tool safeguarding the sufficient level of absorbing and recapitalization capacity of failing banks. The contribution is three-fold. Firstly, the article provides comparative analysis of TLAC and MREL and identify the main differences associated with scope of eligible institutions, eligible instruments subordination requirements and the required limits of the standards. Secondly, we identify main differences resulting from the revision of BRRD with respect to areas mentioned in comparative analysis. Thirdly, the article presents descriptive analysis of the CNB´s approach to calibration of MREL, which is based on TREA and leverage ratio.

The article deals with the analysis and evaluation of the application of macroprudential policy in the Czech Republic after five years of experience in identifying sub macroprudential objectives and selecting appropriate tools. It compares the recommended methodology of the European Systemic Risk Board with the methodology applied by the Czech National Bank. Selected sources of instability and corresponding tools for analysis are divided into two groups. The first group consists of tools that its significance and impact are subject to great discussion. It is a countercyclical capital reserve and risk management of retail loans secured by residential real estate. The second group of instruments represents a capital reserve to cover systemic risk and capital reserve for systemically important banks, methods for reducing the concentration of sovereign exposures and safety capital reserve.

This paper deals with the comparison of stress tests of institutions using the IRBA method for determining the capital requirement. Different approaches have been used to determine the values of risk parameters PD, EAD and LGD for stres test purpose. Besides the VEC model, which link risk parameters to selected macroeconomic variables, stress tests were constructed using the absolute values model, the relative change model and the VaR model, CVaR respectively. Individual approaches have been tested and compared in two levels. In the first level was stressed only the risk parameter PD, in the second level, all risk parameters were stressed. Empirical analysis on the retail portfolio of retail clients in the Czech Republic during 2005 - 2017 showed some significant differences in the value of capital among some approaches. It has also been demonstrated that by using the appropriate method for stressing only the PD parameter, the same value of capital can be achieved as in the case of stressing all risk parameters simulating the conditions required by the Basel Committee.

The aim of this paper is to summarize results of modern investigation of Basel III impact. In order to do so, the author has analyze methodology of more than thirty studies focused on the impact of increased capital adequacy, adopted under Basel III framework, on the lending activity of commercial bank. The paper presents main methodology within both macro and microeconomic approach. Complex macroeconomic models simulate impact of increased bank's equity on profit function of the bank considering at the same time changes of total risk weigheted assets or banks' balance structure. Within the microeconomic approach, the paper puts emphasis on CAPM, as a most widely established methodology, and assumptions formed about the real M-M effect for banks. As a result, the paper brings an evidence of consensus about mainly marginal efect of increased equity of commercial banks on lending spreads within vast majority of existing studies. The important factor to consider is the lenght of the implementation period. In the long-term there is expected no significant effect of increased equity on loans pricing. Somewhat bigger differences remains as for impact of higher equity on loan volume. Differences between estimated impact on loan volume roots mainly in different assumptions about elasticities of loan demand and cost of access to new equity considered within scenarious adopted by the studies.

This paper deals with developments in the sector of credit unions in the Czech Republic. The first part of the paper describes the history of the sector and the factors that influence it. The second part deals with the development of credit unions in recent years. The indicators of financial analysis describe the development of the sector and show the influence of individual events, e.g. withdrawal of authorization to operate as a credit union or transformation to the bank. Major emphasis is devoted to the amendment to Act No. 87/1995 Coll., which regulated the obligations of members of credit unions and imposed their greater participation in the credit union itself. In the paper, there is also described an effect of low interest rates on the development of profitability and return on equity. At the end of the paper there is prediction of future development regarding the changes of the regulation and market environment.

The article commemorates the 90th anniversary of the foundation of the Czechoslovak National Bank. In the first part the Banking Office of the Ministry of Finance as the first Czechoslovak central monetary authority as well as a predecessor of the Czechoslovak National Bank is characterized. In the second part the circumstances of the establishment of the Czechoslovak National Bank are analyzed. In the last part the Czechoslovak National Bank as the first central bank in our territory is dealt with.

The article deals with theoretical and practical dimension of the third generation of Basel regulatory standards. The implementation proves more complex than previously supposed. Modern bank regulation theory focus mainly on four areas: factors that lies beyond bank equity pricing, transmission channels of banking crisis on the international level, optimal design of the safety net, well-balanced intensity of regulatory restrictions. Unfortunately, in the real world, bank regulation standards do not often follow the recommendations of economic theory. The rules remain to be subject of policy influence of diverse advocacy groups including banks themselves. The aim of this article is to outline the main ways of actual economic research and the challenges that lie ahead. Special attention is paid to such issues as capital adequacy, moral hazard and tax distorsion of debt financing. The influence of increased capital adequacy requirements, actual income tax policy and deregulation on the stability of commercial banks is being questioned within the study.

On 23 July 2014, European Parliament and Council Directive 2014/92/EU on the comparability of fees related to payment accounts, payment account switching and access to payment accounts with basic features (hereinafter the "Directive") was published in the Official Journal. The transposition of the Directive into national laws and regulations of member states should result in the improvement of the harmonization of legal environment in the field of retail banking. The main aim of this paper is to characterize the Directive and determine through the methods of deduction and analysis, whether the selected banks in the Czech Republic are already prepared to apply the part of Directive that deals with services related to the management of account with basic features. From the view of the author will be assessed if this will actually result in wider available of the provided payment services in relation to the risks related to this activity with regard to the entities acting as service providers. At the same time, hypothesis expressed by the following statement that will either be confirmed or refuted by the author can also be defined: "The services required by the Directive for accounts with basic features are already provided by selected credit institutions, and the implementation of the Directive in this area will thus be smooth."

The article deals with quantitative forecast of demand for life insurance in Czech Rep. in years 2015-2018. In order to derive the forecast, causal model created on behalf of OECD member states, including macroeconomic, demographic as well as social variables was utilized. As an equivalent for the demand itself, density of life insurance in population was employed. The results show that in current period of economic growth, the consumption of life insurance should increase as well; that is, however, in sharp contrast with real development in the first half-year of 2015. This contradiction is probably a consequence of changes in insurance distribution, which recently culminated with public discussion on regulation of intermediaries´ commissions. Subsequent alternative scenario of commission cap was modelled as well, with the results indicating fundamental supply-demand implications.

The paper shows the way you can in forensic practice solve problem of proving the existence of excessive trading (churning) in client securities account held by securities dealer. Mentioned securities account held derivatives also. Derivatives are especially futures, options and ETF funds that invest a substantial portion of its own assets in futures and options. Furthermore, the work describe how it is possible in the forensic practice prove the "control of trader over customer account". It is also discussed the issue of calculation of indicators (esp. Cost to Equity) and the absence of clear algorithms that describe how the calculations of indicators of churning should be done and not only for portfolios (client accounts) containing derivatives. Special attention is paid to the determination of the size of property damage (loss) calculation by churning to the client.

Part of the representation of the European Union chose a tax on financial transactions from a range of possible tax burden on the financial market, which began to discuss in relating to the effects the financial crisis. The aim of the article was to deal with the financial transaction tax in the context of selected theorists view as well as representatives of practice. Furthermore, the article presents a range of possible approaches with the intention to focus on the solution chosen and its risks in detail. The objectives that its supporters connect with the application of tax are evaluated in the conclusion of the article. A financial transaction tax does not include stabilizing factors. On the contrary, due to its introduction can be expected to strengthen the elements of instability in selected countries of the European Union.

In this paper we focus on often forgotten subjects of economic analyses: Czech credit unions. In specific, we centre our analysis on capital adequacy of the largest four credit unions which report lower capital adequacy compared to the rest of the credit union segment or to Czech banks. Recent credit growth of the four largest unions seems unsustainable and risky; what leads to their decreasing capital adequacy. Lower adequacy then leads to lower resiliency to increased risks of current economic crisis. Our analysis estimates that unless credit unions slow down their recent rapid credit growth, they would need to increase their capital by CZK 2.2 billion until the end of 2013. Put differently, the TOP 4 credit unions would almost double their existing capital. The need to significantly increase capital in short term may affect clients of these unions since their loans may become more expensive or their deposits may yield less. In the worst case scenario, the need may lead the credit unions to activities which significantly and adversely affect their stability, e.g. investments into high risk projects, insufficient credit risk cover and overestimated capital adequacy, or breaking the regulatory rules for exposures. To conclude, credit unions are dynamite on Czech financial market and should be supervised carefully by the Czech National Bank.

This paper deals with the definition of the content and objectives of the European banking union. It discusses the mutual relations between the various banking union's elements. Although banking union is a logical continuation of the European integration, the author does not recommend current implementing of banking union. If European banking union was implemented, the Czech Republic should try to negotiate the terms of eliminating the risk for the Czech banking sector and of ensuring equal status in comparison with the euro area countries, but should not remain outside the banking union. The current stability of the Czech banking system may not be permanent and the associated risks for us as a non-member banking union may be much greater than the possible negative impacts that may arise for us if we became the part of the banking union.

The article addresses contractual savings for housing, which form in terms of volume of funds a significant part of the financial market in the Czech Republic. Building savings in the Czech Republic are based on an institutional scheme with government support. It constitutes a closed system with respect to deposits and loans. The key parameter is the government support, which has a major influence on the high attractiveness of building savings as a mean of deposit. Lower attractiveness due to forthcoming changes and the related loss of short term deposits, could lead to an increased liquidity risk stemming from maturity mismatch between assets and liabilities of building societies.

The article dealed about finding suitable model market conformal governing on czech financial market. Current organization of CNB as supervisory body in Czech republic are discussed. Futher the study of World bank about corporate governance in insurance branch and by care of consumers on financial market is commented. Authors meaning is not to increase the governing measure on financial markets.