Banking Regulation 2025 Comparisons

Banking law and regulation in the Czech Republic is heavily influenced by and harmonised with EU banking regulations, with the principal goal of ensuring the stability of the financial system and protection of the interests of bank customers.

The main pieces of legislation governing the banking sector are  as follows.

• The Act on Banks (AoB) implements a range of EU banking sector rules, among others Regulation No 575/2013 on prudential requirements for credit institutions (CRR), Directive 2001/24/EC on the reorganisation and winding up of credit institutions, Directive 2013/36/EU on access to the activity of credit institutions and the prudential supervision of credit institutions, and Directive 2019/878 amending Directive 2013/36/EU. The AoB constitutes the cornerstone of banking regulation in the Czech Republic.
• The Act on Payments implements Directive (EU) 2015/2366 on payment services in the internal market (the PSD II). This Act regulates the activities and obligations of certain persons authorised to provide payment services and issue electronic money.
• The Act on the Czech National Bank (the “CNB Act”) regulates the operations and powers of the Czech National Bank as a financial market supervisory authority and crisis resolution authority.
• The Act on Recovery Procedures and Crisis Resolution in the Financial Market (the “RPCR Act”), implements Directive 2014/59/EU establishing a framework for the recovery and resolution of credit institutions and investment firms. This Act regulates resolution planning, procedures in the event of the failure of an obliged person or in the event of a group default and resolution financing, as well as the operation of the CNB as the local resolution authority.

The banking sector is also affected by a number of other acts. In particular:

• the Act on Certain Measures Against the Legalisation of the Proceeds of Crime and the Financing of Terrorism (the “AML Act”) provides for due diligence duties regarding money laundering;
• the Capital Market Undertakings Act regulates the provision of investment services, custody and settlement services as well as the transparency of listed issuers;
• the Non-performing Loans Market Act governs the obligations in the administration of bank-granted loans that are classified as a non-performing exposure under Article 47a of the CRR;
• the Consumer Credit Act regulates the conditions for granting and arranging consumer credit and mortgages; the
• Act on Banknotes and Coin Circulation regulates paper currency, coins and money circulation;
• the Act on Bonds governs the procedure of the issuance of bonds;
• the Act on Bankruptcy and Methods of its Resolution regulates the procedures in insolvency events; and
• the Takeover Act regulates mandatory takeover bids addressed to owners of publicly traded securities and other obligations.

In addition to the domestic rules, there are numerous directly applicable EU regulations relevant to the banking sector, such as DORA (Regulation 2022/2554), MiCA (Regulation 2024/1114), AMLR (Regulation 2024/1624), and SFDR (regulation 2019/2088), to name a few.

The Czech National Bank

The Czech National Bank (CNB) supervises the banking sector as well as the capital markets, insurance companies, pension funds, credit unions, securities dealers, payment institutions and consumer credit providers. The supervisory activities of the CNB involve the licensing of financial institutions, monitoring of law and regulation compliance, conducting inspections and obtaining the information necessary for the exercise of such supervision. The banking sector is also regulated by decrees issued by the CNB.

Banking licences are granted by the CNB, whereby the licence may cover one or more banking activities, such as accepting deposits, providing credit, payment services, investment services, custody, clearing, financial advisory and intermediation services.

Licences may be granted by the CNB to banks seated in the Czech Republic or established outside of the EU intending to establish a local branch.

Application Process

The AoB states a number of requirements that must be fulfilled in order to obtain a banking licence. These include, among others, a sufficient amount of capital available for the operation of the bank, the integrity of the owners, the initial capital, the competence of key persons and a developed business plan. Licence applications are accompanied by a number of required documents.

Typically, the procedure for granting a bank licence takes 12 to 18 months, depending on the complexity of the business plan and target markers.

Should a bank based outside the EU intend to establish a branch in the Czech Republic, the preconditions are similar. In addition, the CNB will request further information about the bank from the competent authority of its home country and require appropriate supervisory co-operation arrangements be in place.

Banks established within the EU can benefit from the so-called “single licence principle”, under which a bank authorised in an EU member state is entitled to carry out activities under its licence in the territory of another EU member state without additional licensing requirements in that EU member state. Such bank may provide services in the territory of another EU member state through its branch or without establishing a branch (ie, on an occasional basis).

To establish a branch, banks must comply with a notification procedure to their home state authority co-operating with the respective host member state authority when submitting information on its business plan, including a list of activities to be provided, the location of the branch, organisational structure and head of the branch.

According to the AoB, persons acting in concert must obtain ex ante approval from the CNB to acquire a share of 10% or more or to increase their share to exceed the 20%, 30% or 50% thresholds of voting rights or capital shareholding in a bank, directly or indirectly. This applies even if such persons do not exercise the voting rights associated with the shareholding in the bank.

Applications for CNB approval shall contain details on the person or persons intending to acquire or increase their share in the bank or control the bank, including details about the bank in which the share is to be acquired or increased, total share amount that the applicant will acquire and details about the person transferring the share to the applicant. The applicant must attach the respective evidence.

The CNB shall confirm acceptance of an application no later than two working days from the date of receipt of the “complete” application. However, initial applications usually require additional filings. The CNB shall issue a decision on the application within 60 working days of the date of the written acknowledgement of receipt of the complete application. If the CNB does not issue a decision within this period, consent shall be deemed to have been granted.

When the person acquiring control of a bank is a financial institution with a relevant licence granted by another EU member state, the CNB shall obtain a statement of their home competent authority regarding the acquisition of control over the bank.

Persons acting in concert are similarly obliged to notify the CNB without undue delay of circumstances that reduce their qualified holding in a bank below the thresholds of 50%, 30% or 20%, or if they lose their share altogether, or if they reduce their participation to such an extent that they no longer control the bank.

Should a bank be listed on a stock exchange, persons acting in concert acquiring a share must also comply with the Takeover Act, which establishes additional obligations.

The AoB states that banks are obliged to set up and maintain governance arrangements. These arrangements shall include:

• the prerequisites for proper corporate governance, such as:
1. management principles and procedures;
2. an organisational structure with a delineation of responsibilities and decision-making, which also identifies incompatible functions and avoids conflicts of interest; and
3. administrative and accounting procedures;
• a risk management system, which comprises internal control systems, including internal auditing and compliance functions;
• a way to ensure the credibility, competence and experience of key personnel; and
• remuneration policies and procedures.

The governance arrangements must be effective, comprehensive and proportionate to the nature, scale and complexity of the bank’s risks. The bank must verify and regularly evaluate the effectiveness, integrity and adequacy of the governance arrangements in their entirety and parts. The CNB sets out the requirements for governance arrangements in more detail in the Decree on the performance of the activities of banks, credit unions and securities brokers.

Any bank that is considered significant because of its size (according to the CNB decree) must also establish:

• a risk committee;
• a nomination committee; and
• a remuneration committee.

There is also a voluntary Code of Ethics of the Czech Banking Association, which sets out the rules of conduct of the bank’s employees in relation to clients and to the bank itself.

In addition, to include a certain percentage of employees on the supervisory board, a bill implementing Directive 2022/2381 is being discussed in Parliament. The bill that should require that publicly traded banks with more than 250 employees appoint at least 33% women to their governing body is currently being discussed in Parliament.

According to the AoB, the credibility, competence and experience of the members of a given statutory body, members of the board of directors and members of the supervisory board (the senior management) of a bank must be assessed before the CNB will grant the bank a licence to operate. This also applies to non-EEC based banks intending to establish a branch in the Czech Republic.

Members of senior management must meet these CNB requirements throughout their tenure. Banks shall also inform the CNB regarding any relevant personnel changes. The assessment of credibility, competence and experience is regulated by the Decree on applications and certain information under the AoB and EBA guidelines.

Banks are required to ensure that sufficient staff and financial resources are allocated for the ongoing training of the members of the statutory bodies, members of the management board and members of the supervisory board. This training is in addition to the training that banks are required to regularly provide to all of their employees, including senior management (such as annual training in the area of AML).

The AoB requirements state that the remuneration policies and procedures must:

• contribute to effective risk management;
• be based on equal pay for men and women for equal work; and
• in the case of a member of a statutory body, a member of the management board, supervisory board or other employee whose work activities have a significant impact on the risk profile of the bank, include specific rules for determining the payment of the fixed and variable components of the remuneration of said person and for decision-making on their remuneration.

The amount of the variable remuneration component must not exceed the amount of the fixed remuneration component, except by a special resolution of the bank’s general meeting. These requirements shall be in line with the EBA guidelines on remuneration.

General obligations arising from the AML Act, which implements the EU AML/CFT regulation, also apply to banks. Banks shall carry out customer identification and screening while commencing their business relationship with customers (the KYC process). Such screening includes the verification of whether the customer is listed on any sanction lists.

Banks are required to report any suspicious transactions to the competent authority (the Financial Analytical Office). Employees of the bank are required to pass AML/CFT training annually.

Banks are required to establish governance arrangements that address the AML procedures and control measures. Details of this governance system are covered by the Decree on certain requirements for AML/CFT internal systems.

The Financial Analytical Office also issues guidelines and Q&As providing a detailed interpretation of the individual AML obligations.

The deposit guarantee scheme in the Czech Republic is provided by the Financial Market Guarantee System established under the RPCR Act (the “Guarantee Scheme”). The Guarantee Scheme manages the assets of the Deposit Guarantee Fund, Resolution Fund and the other assets of the Guarantee Scheme separately in terms of assets and accounting. The Guarantee Scheme is administered by a five-member board of directors, with two members appointed from among CNB staff, two appointed from among the Ministry of Finance staff and one appointed per the proposal of the Czech Banking Association. The Guarantee Scheme co-operates with the CNB and the Ministry of Finance.

Retail deposits are essentially covered by the Guarantee Scheme under the condition that the AML/CFT KYC procedure is met.

Deposits of certain persons/entities not covered by the Guarantee Scheme are claims on deposits by:

• a bank or a bank branch;
• a financial institution;
• an insurance company, reinsurance company;
• a health insurance company;
• a state, municipality, county; or
• deposits representing subordinated debt and certain types of convertible debt; and
• instances representing the legalisation of the proceeds of criminal activity as declared by a court.

The Guarantee Scheme covers the total amount of deposits up to equivalent of EUR100,000 per customer per bank; excess amounts are not covered.

The Guarantee Scheme is continuously financed by contributions paid by banks and other credit institutions established in the Czech Republic or having a local branch. The CNB annually determines the amount of these contributions in accordance with the EBA’s guidelines, taking into account the total volume of covered deposit claims and the level of risk borne by the given bank. The CNB shall publish the rate of contributions for the period in question.

Prudential requirements for banks are stipulated in line with the CRR. Under Article 92 of the CRR, banks are obliged at all times to satisfy the following own held funds requirements:

• Common Equity Tier 1 capital ratio of 4,5%;
• Tier 1 capital ratio of 6%;
• total capital ratio of 8%; and
• leverage ratio of 3%.

In addition, the CNB imposes a benchmark countercyclical capital buffer ratio on a quarterly basis within a range of 0% to 2.5% of the total risk exposure in multiples of 0.25%.

The CNB may also require a bank to maintain a capital buffer to cover systemic risk on an ongoing basis for all exposures or a subset of exposures. The CNB imposes the systemic risk capital buffer rate for all exposures or a subset of exposures in multiples of 0.5%. The combined systemic risk capital buffer rate should not exceed 5% of the total risk exposure.

The CNB may also decide to require a bank that is a systemically important institution to maintain an additional capital buffer on an ongoing basis.

Bank compliance with all of these requirements is subject to the ongoing monitoring and supervision of the CNB.

Banks are also subject to CRR liquidity requirements that they maintain a liquidity coverage ratio. The general liquidity requirements under Article 509 of the CRR and the net stable funding ratio (NSFR) are applied. However, the CNB may also impose additional specific liquidity requirements, including limits on the maturity mismatch between assets and liabilities, taking into account the bank’s specific business model, when this appears appropriate in light of the regular supervisory review.

In addition, the requirements above are further expanded by a Decree on the performance of the activities of banks, which contains further rules for covering risks and risk management.

A default of a bank or other financial institution shall be resolved through a process of bankruptcy, while specific resolution and recovery procedures also apply. The resolution of a bank’s insolvency through reorganisation is not possible. An insolvency proposal requesting a resolution by process of bankruptcy must filed without undue delay by the CNB, as the competent resolution authority.

The recovery and resolution of a bank insolvency is governed by the RPCR Act, which, in particular, regulates the:

• essentials of planning, crisis management capability and intra-group support;
• powers of the CNB to conduct an early intervention in the event of its finding deficiencies in the bank’s activities;
• power of the CNB to place the institution under temporary administration by its nominee, if necessary;
• asset and debt valuation procedure and preliminary estimate; and
• measures and activities used in resolving such bank crisis.

The FSB Key Attributes of Effective Resolution Regimes applies in general, subject to certain reservations. The CNB does not support the establishment of specific resolution funds. Also, a request that the other group members continue providing necessary services to the bank in resolution is conditioned by the consent of the respective supervisory authorities, as in the case of intra-group financial support. The RPCR Act has not yet been amended following the last update of the FSB Key Attributes of Effective Resolution Regimes in 2024.

One of the stated purposes of bank resolution is to protect the deposited funds covered by the Guarantee Scheme and similar rights to compensation, and to protect the assets of its clients and customers. Deposit claims insured up to the amount of compensation covered by the Guarantee Scheme enjoy full protection in the resolution.

The Czech Republic is bound by Regulation 2020/852, which establishes the criteria for determining whether an economic activity qualifies as environmentally sustainable for the purposes of establishing the degree to which an investment is environmentally sustainable.

Significant harm to environmental objectives, as defined by this regulation, is also taken into account when assessing whether an activity is environmentally sustainable.

Banks are required to comply with the ESG transparency obligations under the SFDR regulation. Banks provide, inter alia, respective pre-contractual disclosures and periodic reports and transparency statements about their individual financial products.

There is currently no comprehensive domestic legislation in the Czech Republic to further develop the requirements set out in the EU legislation.

However, the implementing legislation provides reference to assessing the customer’s sustainability requirements when determining the target market for the investment instrument, as well as the necessity to provide prescribed suitability information on a regular basis, and to provide the distributor of the investment instrument with information enabling them to take due account of any sustainability requirements of the customer.

Also, non-financial disclosures and reports for certain types of corporations, including banks, are stipulated in the Accounting Act that implements EU regulations requiring certain companies to publish annual sustainability reports.

Forthcoming Regulation 2022/2554 on digital operational resilience for the financial sector (DORA) requires banks to, inter alia, implement robust measures and governance to enhance resilience to digital and cyber risks.

As the DORA represents directly applicable EU rules, the Act on digital financial market accommodates DORA requirements regarding the supervisory powers of the CNB, as well as corrective measures and sanctions for the breach of the DORA obligations by financial institutions and third-party ICT providers. This Act is expected to come into effect in early 2025.

The CNB has not yet issued any interpretations or draft decrees regarding the obligations of banks under the DORA. Nevertheless, the CNB has already joined the European standard for advanced penetration testing Threat Intelligence-based Ethical Red Teaming (TIBER-EU). The CNB is also organising expert seminars with financial market participants in preparation for the introduction of the DORA.

The Act on Financial Market Digitalisation (implementing the DORA) and the Act implementing Directive 2022/2381 on improving the gender balance among the directors of listed companies and related measures, which were already described in 10.1 DORA Requirements, are likely to come into effect in early 2025. The DORA is set to enter into force in January 2025.

An amendment of the AoB and other related acts is currently being discussed in the Parliament. The amendment aims to transpose Directive 2024/1619 (CRD VI) and Regulation 2024/1623 (CRR III), which will complete the implementation of the Basel III standard. The bill provides for a more comprehensive regulation of ESG risks, governance requirements and enhances the regulation of the branches of non-EEC banks. A draft implementing the decree and subsequently completing the implementation of CRD VI will be transposed through a decree of the CNB after the approval of the AoB amendment.

As of January 2026, an amendment to the Accounting Act is scheduled to come into force. This amendment further enhances the ESG obligations of corporate entities. In particular, it provides for annual sustainability reports and other ESG disclosures.