Recommendations of the Czech National Bank The continuing increase in the number of bank loans provided in the Czech Republic has drawn the attention of the Czech National Bank (CNB), the regulatory body obliged to maintain and support financial stability. The CNB has therefore published a number of recommended industry guidelines regarding mortgage lending conditions. In particular, lending limits have been suggested relating to loan-to-value ratios (LTV); debt-to-income ratios (DTI); and debt service-to-income ratios (DSTI). In the opinion of the CNB, these limits need to be observed in order to minimise risks connected with the growing economic market. In 2015, CNB issued its first recommendation on managing the risks associated with providing retail secured residential property loans. This was aimed at preventing risks associated with the residential property market by setting LTV limits. In 2016 and 2017, the CNB continued to tighten LTV limits; DTI and DSTI levels were also introduced.

While a strong domestic economic performance calls for a hike in March, the uncertainty surrounding the external environment is likely to prevail, leaving the CNB board in wait-and-see mode. We still believe the CNB will deliver two hikes this year, but we will have to wait for the Brexit situation to calm down and for stronger signals regarding a recovery in Germany.