Basel III: How Have Czech Banks Reached Higher Capital Ratios?
Basel III: How Have Czech Banks Reached Higher Capital

Summary/Abstract: According to the Czech National Bank, the average capital adequacy of Czech banks increased from 14.1% in 2009 to 17.1% in 2013. For the sample of 17 Czech banks we aim to identify the strategies that Czech banks adopted in order to increase their capital ratios. Our analysis shows that as with the large multi-national banks from advanced economies, retained earnings have played a major role in increasing the average capital ratio of Czech banks. In addition, the Czech banks have decreased their risk to strengthen the overall ratio. The results of our analysis are useful mainly from a regulatory point of view as currently the countercyclical buffer is set to its minimum of 0% of risk-weighted assets and the Czech National Bank may increase the buffer up to 2.5% in the medium or long-term.

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