Financial Market Supervision Report 2008
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Financial Market SuperviSion report 2008 Financial Market SuperviSion report ISBN 978-80-87225-18-9 contentS INTRODUCTION 7 FINANCIAL MARKET COMMITTEE 8 SUMMARY 10 A. FINANCIAL MARKET SUPERVISION IN 2008 14 1. INTEGRATION OF FINANCIAL MARKET SUPERVISION 15 2. LEGISLATIVE CHANGES IN THE FINANCIAL MARKET SUPERVISION AREA IN 2008 16 2.1 CHANGES TO LAwS 16 2.2 DECREES AND PROVISIONS OF THE CzECH National BANK 18 2.3 Official information 20 2.4 Regulatory changes under preparation 21 2.5 Assessment of the situation in financial market regulation 23 3. ENHANCEMENT OF FINANCIAL MARKET STABILITY AND TRANSPARENCY 24 3.1 THE Basel capital accord 24 3.2 Solvency II 24 3.3 Regulation in the collective investment area 25 3.4 SECURITIES SETTLEMENT SYSTEM 25 3.5 Regulation of credit rating agencies 25 3.6 International accounting standards 26 4. DIRECT FINANCIAL MARKET SUPERVISION IN 2008 27 4.1 LICENSING, approval and authorisation activities 27 4.2 Notifications 34 4.3 Registrations 35 4.4 ENFORCEMENT 35 4.5 OFF-site surveillance 38 4.6 ON-SITE Examinations 44 4.7 Cooperation with supervised entities 49 5. CENTRAL CREDIT REGISTER 50 6. INTERNATIONAL COOPERATION 52 6.1 Cooperation wITHIN EUROPEAN COMMISSION STRUCTURES 52 6.2 Cooperation wITHIN EUROPEAN CENTRAL BANK STRUCTURES 57 6.3 Cooperation wITHIN THE BASEL COMMITTEE ON BANKING Supervision 58 6.4 Cooperation wITHIN THE GROUP OF BANKING Supervisors from CENTRAL AND EASTERN EUROPE 58 6.5 Cooperation wITHIN THE International ORGANIzation of SECURITIES COMMISSIONS 58 6.6 Cooperation wITHIN THE International Organisation of PENSION Supervisors 59 6.7 Cooperation wITHIN THE International Association of INSURANCE Supervisors 60 6.8 Cooperation with partner supervisory authorities 60 4 contentS B. THE FINANCIAL MARKET IN 2008 63 METHODOLOGICAL NOTE 64 1. THE ECONOMIC ENVIRONMENT IN 2008 65 2. CREDIT INSTITUTION SECTORS 67 2.1 THE STRUCTURE OF THE BANKING SECTOR 67 2.2 BANKING SECTOR PERFORMANCE 71 2.3 ACTIVITIES OF THE BANKING SECTOR 75 2.4 RISKS IN BANKING 81 2.5 Capital adeqUACY 85 2.6 THE CREDIT UNION SECTOR 88 3. THE CAPITAL MARKET 91 3.1 INVESTMENT FIRMS 91 3.2 COLLECTIVE INVESTMENT 93 3.3 PENSION FUNDS 96 3.4 Regulated markets 97 4. THE INSURANCE MARKET 99 4.1 INSURANCE MARKET STRUCTURE 99 4.2 Basic indicators of the insurance market 102 4.3 Balance sheet and financial results of the insurance sector 105 4.4 Solvency of insurance undertakings 109 ABBREVIATIONS 111 USEFUL wEBSITES 114 contentS 5 C. ANNExES 116 1. M ain indicators of monetary and economic developments in the CzECH REPUBLIC 117 2. O rganisational structure of CNB FINANCIAL MARKET Supervision AS OF 31 DECEMBER 2008 118 3. BREAKDOwN OF BANKS INTO GROUPS 119 4. BREAKDOwn of insurance undertakings into GROUPS 120 5. N umbers of foreign financial undertakings providing financial services IN THE CzECH Republic under the freedom to provide services (without establishing a branch) AS OF 31 DECEMBER 2008 121 6. BANKING SECTOR BALANCE SHEET 122 7. BANKING SECTOR PROFIT AND LOSS ACCOUNT 124 8. INSURANCE SECTOR BALANCE SHEET 126 9. INSURANCE SECTOR PROFIT AND LOSS ACCOUNT 128 10. PENSION FUND SECTOR BALANCE SHEET 130 11. PENSION FUND SECTOR PROFIT AND LOSS ACCOUNT 132 12. COLLECTIVE INVESTMENT FUND SECTOR BALANCE SHEET 133 13. COLLECTIVE INVESTMENT FUND SECTOR PROFIT AND LOSS ACCOUNT 135 14. LISTED BONDS ISSUED IN 2008 136 15. LISTED SHARE ISSUES/TRANCHES ADMITTED IN 2008 136 16. Listed investment certificate issues admitted as of 31 DECEMBER 2008 137 17. BOND PROGRAMMES APPROVED IN 2008 138 18. Publicly offered unlisted shares in 2008 138 19. M andatory takeover bid after gaining control of a target company OR ACqUIRING A 2/3 OR 3/4 SHARE OF THE VOTING RIGHTS in a target company in 2008 138 20. SqUEEzE-OUTS IN 2008 139 21. Voluntary takeover bids and changes thereto in 2008 139 22. GROSS PREMIUMS wRITTEN BY CLASSES OF INSURANCE IN 2008 140 introDuction 7 Under the powers vested in it by law and in accordance with its mission1, the Czech National Bank as the integrated financial market regulatory and supervisory authority works to ensure the stability of the financial system and the safe and smooth development of the financial market in the Czech Republic. A stable financial system and an efficient financial market based on well-functioning financial institutions are a prerequisite for sound economic development. In exercising its supervisory powers and in its activities generally, the CNB not only strives to ensure that the entities it supervises comply with the relevant regulations, but also focuses on enhancing the institutional infrastructure of the Czech financial market, on increasing its transparency and competitiveness and its credibility in the eyes of the public, and on supporting entrepreneurship. The CNB strives to be seen as a competent, dynamic and flexible open institution recognised by the market, the public and specialists for working to exacting standards and for taking a professional, sensitive, yet effective approach to financial market regulation and supervision. The CNB performs its role of integrated regulatory and supervisory authority by means of regulatory work, licensing and authorisation work and supervisory work, consisting of off-site surveillance and on-site examinations of financial institutions and other institutions making up the infrastructure of the financial market. The CNB also uses other tools of integrated regulation and supervision, including remedial measures and, where appropriate, penalties where it uncovers shortcomings, and also the collection, processing and evaluation of information, which is used to support supervision and to inform the public about the situation and development of the Czech financial market. If unexpected events occur outside or inside the financial sector, the CNB exercises its right to require the information needed to monitor the current situation in the financial sector and, after assessing that information, makes decisions regarding necessary measures. In connection with the integration of financial market supervision, a new legal obligation was imposed on the CNB to compile a Financial Market Supervision Report each year and submit it for information to the Chamber of Deputies, the Senate and the Government by 30 June of the following year. This report is also intended to inform the public about financial market supervisory activities and financial market developments in the previous year. The report consists of two parts. Part A deals with financial market supervision in 2008, changes in legislation affecting the financial market, the introduction of new methods to enhance the stability and transparency of the financial market, and international cooperation in the supervisory area. Part B describes developments in the individual segments of the financial market (in particular credit institutions, the capital market and the insurance sector) in 2008. In accordance with the Act on the Czech National Bank, the draft report was submitted to the Financial Market Committee, which exercised its right to append its opinion to the report. The report was discussed and approved by the CNB Bank Board on 11 June 2009. 1 The Mission of the Czech National Bank for the Supervision of the Czech Financial Market; for details, see: http://www.cnb.cz – Financial market supervision. 8 Financial Market coMMittee The Financial Market Committee (the “Committee”) was established on the basis of Act No. 57/2006 Coll., under which financial market supervision in the Czech Republic was integrated into the Czech National Bank,2 as an advisory body to the CNB Bank Board for financial market supervision. The Committee debates matters of a conceptual nature relating to financial market regulation and supervision and also provides its opinion on significant financial sector trends having a regulatory aspect. However, the Committee does not deal with matters concerning specific financial market entities. The seven-member Committee comprises: – Jiří Rusnok, Chairman, Radek Urban, Vice-Chairman and Václav Tomek (elected by the Budget Committee of the Chamber of Deputies from candidates proposed by financial market professional organisations), – František Klufa, Financial Arbitrator of the Czech Republic (who replaced his predecessor Otakar Schlossberger on 2 January 2008), – Klára Hájková, Deputy Finance Minister (who replaced Milan Šimáček on 1 October 2008) and Jiří Król, Executive Director of the Financial Market Analysis and Development Department (this position was held by Klára Cetlová until 1 May 2008 and then by Libuše Horáková until 30 September 2008). – Miroslav Singer, Vice-Governor of the CNB. The members of the Committee perform their duties in person and without remuneration. Given its composition, encompassing representatives of both the private and public sectors, the Committee is an independent forum that provides the CNB with feedback, opinions, recommendations and suggestions on matters associated with the CNB’s function as the domestic financial market supervisory authority. The Committee’s staffing and remit also mean that it in fact also acts in an advisory capacity to the Ministry of Finance as the central government authority for the financial market, particularly in terms of the configuration and form of future legislation governing business and supervision in this area. In practice, detailed minutes are prepared after each Committee meeting, containing a written record of the discussion, the opinions of the individual members of the Committee and the conclusions approved by the Committee. After being approved, these minutes are passed on to the CNB Bank Board for information. To make the Committee’s activities transparent, a record is also made of the main items on the agenda and the conclusions of the debate. After approval, this record is published on the CNB website (in Czech only: http://www.cnb.cz − Dohled nad finančním trhem − Výbor pro finanční trh). The Committee also posts the agenda of its next meeting in advance on the website and its members can, at their discretion, consult financial market professional associations on most of the documents under discussion.