Open and historically highly profitable, the Czech banking system performed better than expected in 2020. While profits halved, sectors including mortgage lending maintained momentum and the central bank and leading commercial lenders were well prepared to handle the fallout from the Covid-19 pandemic. Interest rate rises in the coming months should give scope to raise margins again, as banks look to focus on a digital future.
The industry is overseen by the Czech National Bank (CNB), which is the supervisory body for financial markets as well as the country’s monetary and macroprudential authority. As the Czech Republic is outside the eurozone, the bank sets an independent monetary policy, which is generally regarded as having proved successful in recent crises. The bank’s primary objective – as outlined in the Czech constitution – is price stability, and it has a reputation for hawkishness on inflation.
