S&P says Czech banks are well-positioned to meet Basel III rules.

By bne IntelliNews May 30, 2011
Czech banks are well-positioned to face the tougher regulatory rules for funding and capital under Basel III, rating agency Standard&Poors said in a report. The Czech banking system benefits from a structural excess of stable and granular deposits over loans and therefore features minimal relinance on wholesale funding sources, S&P credit analyst Pierre Gautier said. The countrys three largest banks Ceska Sporitelna, Ceskoslovenska Obchodni Banka and Komercni Banka already meet the capital requirements to be introduced by Basel III. As a result, Standard & Poor's envisages a fairly stable credit outlook for Czech banks over the coming quarters. The conservative credit culture and retail-oriented business models of the banks in the country have helped them emerge faster than expected from the recession in 2009 and they are expected to further strengthen their financial profiles amid the gradual economic recovery in the next two years. The agency expect the share of non-performing loans (NPLs)to start falling in the second half of 2011 on the back of a slow but gradual economic recovery. NPLs hit a seven-year high of 6.7% of total credits at end-March 2011. However, the ration is lower than in other central and eastern European countries. According to S&P, if the new lending volumes remain sluggish and below the pre-crisis levels in 2011 that could reduce the banking systems currently strong profitability.

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