Eight banks struggle in Czech stress tests

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Czech National Bank: report says credit risk is most significant risk in Czech banking system. Photo: Mike Beltzner

Eight banks saw their capital ratios fall below regulatory minimums in the Czech National Bank's (CNB) latest stress tests, the results of which were published today (December 12).

Banks were exposed to a baseline scenario derived from the central bank's November macroeconomic forecasts, and an adverse scenario assuming a "marked drop" in economic activity in Europe over the next three years.

In the adverse scenario, the Czech economy suffers a V-shaped recession and a debt-deflation spiral that

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