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Czech central bank reduces countercyclical buffer rate, keeps mortgage rules unchanged

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PRAGUE, June 6 (Reuters) -The Czech National Bank (CNB) will cut the countercyclical capital buffer rate applied to banks by 50 basis points to 1.25% from July, it said on Thursday after a financial stability meeting at which it assessed the financial sector as being resilient to possible economic risks.

The bank at the same time decided to set the systemic risk buffer at 0.5%, taking effect on Jan. 1, 2025, to strengthen the banking sector.

"Stress tests have indicated that the Czech financial sector remains resilient to adverse economic developments, thanks partly to the capital buffers applied," the bank said.

The bank left its sector rules for mortgage lending untouched after easing some aspects last November.

Upper limits on loan-to-value (LTV) ratios for lending will stay at 80% and 90%, the latter for younger borrowers, it said, amid a gradual recovery in mortgage lending and the property market after high interest rates cooled activity in the past few years.

But it said it expanded its recommendation to cover all consumer credit lending for housing.

"We can also see demand on the market for non-mortgage housing loans for reconstruction and energy-saving measures," central bank board member Karina Kubelkova said.

"With effect from October, we will recommend that lenders assess with increased caution whether clients with these loans are taking on excessive risks relative to their income."

Reporting by Jason Hovet and Jan Lopatka


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