Supervisory stress test shows banking sector resilient
The Financial Stability Report received approval from the CNB Bank Board on June 1, 2023. The CNB reaffirmed, based on the outcomes of the supervisory stress test applied to banks, that the banking sector demonstrates resilience against hypothetical adverse economic scenarios, primarily due to its robust initial capitalization.
The methodology of the European Banking Authority (EBA) was utilized and customized to suit the specific conditions of the Czech banking sector. The CNB conducted testing, including assessments of credit, market, and operational risks, as well as interest and non-interest income and expenses, along with an evaluation of capital under both Baseline and Adverse Scenarios. For this test, the CNB selected a total of 12 domestic banks, collectively representing approximately 91% of the assets within the Czech banking sector. The data utilized for the test was as of the end of 2022.
At the conclusion of 2022, the consolidated capital ratio for the examined portion of the banking sector stood at 20.2%. In a scenario where economic activity in both the Czech Republic and abroad experiences a downturn, this ratio is anticipated to decrease to 17.5%. Still, the total capital ratio of the tested part of the banking sector remained well above the regulatory minimum of 8%.
The banking sector maintains a substantial capital reserve, ensuring its resilience even in the face of severe negative shocks.