Economy and Banking Sector of the Czech Republic

Location Central Europe
Population (2016)10 553 843 ↑ (0.00%)
EU Status member since 2004
Economy
National Currency CZK (Czech koruna)
    Exchange Rate (2017-01-19) 1 EUR = 27.021 CZK
GDP 
    Nominal GDP (2015)167.0 bln EUR ↑ (+0.07%)
    Nominal GDP per Capita (2015)15 800 EUR ↑ (+0.07%)
    Real GDP Growth (2015)4.5 % ↑ (2014: 2.0 %)
Inflation Rate 
    CPI, MoM (Sep 2016)-0.2 % no change(unchanged)
    CPI, YoY (Sep 2016)0.5 % ↓ (Aug 2016: 0.6 %)
    CPI, Year Average (2015)0.3 % ↓ (2014: 0.4 %)
Unemployment Rate (2015)5.1 % ↓ (2014: 6.1 %)
Government Bond Yield (Sep 2016)0.25 % ↓ (Aug 2016: 0.29 %)
Credit Ratings (as of Sep 2016)
    FitchA+ high credit quality, outlook stable
    Moody'sA1 upper medium grade, outlook stable
    S&PAA- high grade
Taxation
Double Taxation Agreements 85 signed agreements
Information Exchange 
    Exchange on Request 9 signed agreements
    Automatic Exchange starts in September 2017
FATCA IGA in effect since 04 August 2014, Model 1
Banking Sector
Financial Market Development 4.7 (max 7.0) rank: 27th out of 138 countries
    Banks' Soundness 6.0 (max 7.0) rank: 14th out of 138 countries
Banking Industry Country Risk 4(1 - lowest risk, 10 - highest risk)
    Economy Risk 4
    Industry Risk 4
Deposit Guarantee Scheme 
    Maximum Protected Amount 100 000 EUR
Country Ceiling for Deposits 
    Local Currency (Czech koruna)Aa2 high grade
    Foreign CurrencyA1 upper medium grade
Deposit Rates (Aug 2016, CZK)1.07 % ↑ (Jul 2016: 0.70 %)
Banking Sector Structure 
    Number of Banks58
    Recent Changes (2015) new banks: 2, closed banks: 1
    Consolidated Assets (2015) 199.24 bln EUR ↑ (+9.66%)
Major Banks
 Česka Sporitelna (Erste Bank)  Hypoteční Banka
 Československá Obchodní Banka (KBC)  Raiffeisen Bank
 Komercni Banka (Societe Generale)  J&T Banka
 UniCredit Bank
 List of Banks in Czech Republic

Czech Economy

National Currency

During the last 11 years EURCZK exchange rate was within the range 23.893 - 28.718, reaching its maximum in Jun 2007 and falling to its minimum in Jun 2008.

Euro to Czech koruna (EURCZK).
Chart 1. Euro to Czech koruna (EURCZK). Source: ECB.
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GDP

According to Eurostat, nominal GDP of Czech Republic in 2015 was 167.0 bln EUR.

Czech Republic outperforms the European Union in terms of real GDP growth with the average annual differential coming to 0.4% over the past 10 years (2005 - 2015). In 2015 real GDP growth was 4.5% which was above the Euro Area average (1.6%) and above the European Union average (1.9%). Real GDP growth in 2016 - 2021 are IMF's estimates.

Real GDP Growth in Czech Republic.
Chart 2. Real GDP Growth in Czech Republic. Source: Eurostat, International Monetary Fund.

In 2015, nominal GDP per capita in Czech Republic was 15 800 EUR.

Czech Republic has a below-average level of wealth in terms of per-capita GDP at purchasing power parity (PPP); this economic welfare indicator has, on average, fell behind that of the European Union by -14.4% over the past 10 years (2005 - 2015). GDP per capita at PPP in 2016 - 2021 are IMF's estimates.

GDP Per Capita at Purchasing Power Parity in  Czech Republic; European Union = 100.
Chart 3. GDP Per Capita at Purchasing Power Parity in Czech Republic; European Union = 100.
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Inflation Rate

According to Eurostat, inflation rate in Czech Republic in 2015 expressed as annual percentages of average consumer prices was 0.3% which was above the Euro Area average (0.0%) and above the European Union average (0.0%). Inflation rates in 2016 - 2021 are IMF's estimates.

Inflation Rate in Czech Republic.
Chart 4. Inflation Rate in Czech Republic. Source: Eurostat, International Monetary Fund.
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Taxation in Czech Republic

Double Taxation Agreements

Double Taxation Agreement (DTA) is an agreement between two or more countries for the avoidance of double taxation.

Czech Republic signed DTAs which already came info force with the following jurisdictions (for agreements which came into force after 01 January 2013 the date of coming into force is given in brackets):

 Albania
 Armenia
 Australia
 Austria
 Azerbaijan
 Bahrain
 Barbados
 Belarus
 Belgium
 Bosnia and Herzegovina
 Brazil
 Bulgaria
 Canada
 China
 Croatia
 Cyprus
 Denmark
 Estonia
 Ethiopia
 Finland
 France
 Georgia
 Germany
 Greece
 Hong Kong
 Hungary
 Iceland
 India
 Indonesia
 Ireland
 Israel
 Italy
 Japan
 Jordan
 Kazakhstan
 Korea, Democratic People's Republic of
 Korea, Republic of
 Kuwait
 Latvia
 Lebanon
 Lithuania
 Luxembourg
 Macedonia
 Malaysia
 Malta
 Mexico
 Moldova, Republic of
 Mongolia
 Montenegro
 Morocco
 Netherlands
 New Zealand
 Nigeria
 Norway
 Panama (Dec 2013)
 Philippines
 Poland
 Portugal
 Romania
 Russian Federation
 Serbia
 Singapore
 Slovakia
 Slovenia
 South Africa
 Spain
 Sri Lanka
 Sweden
 Switzerland
 Syrian Arab Republic
 Tajikistan
 Thailand
 Tunisia
 Turkey
 Ukraine
 United Arab Emirates
 United Kingdom
 United States
 Uzbekistan
 Venezuela
 Vietnam

There are also several agreements between Czech Republic and other jurisdictions which were signed but haven't yet come into force (for agreements signed after after 01 January 2013 of signing the agreement is given in brackets):

 Colombia
 Luxembourg (Mar 2013)
 Pakistan (May 2014)
 Saudi Arabia
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Information Exchange

There are 3 ways for jusrisdictions to exchange information on tax matters:

  • spontaneously;
  • on request;
  • automatically.

Spontaneous exchange of information is provision of information that is forseeably relevant to another party without a request being previously sent.

Tax Information Exchange Agreements (TIEAs) enable exchange of information on request relating to a specific tax investigation, either criminal or civil.

Czech Republic signed TIEAs which already came info force with the following jurisdictions (for agreements which came into force after 01 January 2013 the date of coming into force is given in brackets):

 Andorra (Jun 2014)
 British Virgin Islands
 Cayman Islands (Sep 2013)
 Guernsey
 Isle of Man
 Jersey
 San Marino

There are also several agreements between Czech Republic and other jurisdictions which was signed but haven't yet come into force (for agreements signed after 01 January 2013 of signing the agreement is given in brackets):

 Bermuda
 Sint Maarten (Dutch part)

Automatic information exchange allows jurisdictions to exchange information automatically, without having a specific tax investigation.

Czech Republic signed the automatic information exchange agreement on 29 October 2014 and committed to start the automatic information exchange in September 2017.

Further Information:
Automatic Exchange of Information on Financial Accounts
Countries Which Will Not Automatically Exchange Account Information

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FATCA

Foreign Account Tax Compliance Act (FATCA) which became law in the United States in March 2010, focuses on reporting made by foreign financial institutions about financial accounts held by US taxpayers or foreign entities in which US taxpayers hold a substantial ownership interest. The FATCA-reporting is facilitated by Intergovernmental Agreements (IGAs).

Czech Republic has FATCA agreement with the U.S. in effect since 04 August 2014 (Intergovernmental Agreement Model 1). Financial institutions operating in Czech Republic are required to identify U.S. taxpayers by January 1, 2017 and to report the information for 2017 and the subsequent years. The agreement is reciprocal: Czech financial accounts hold in U.S. financial institutions will be reported to Czech authorities.

Further Information:
FATCA and European countries

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Czech Banking Sector

Financial Market Development

According to World Economic Forum's Global Competitiveness Report 2016-2017, financial market development in Czech Republic is scored 4.7 out of maximum 7.0 and ranked 27th out of 138 analysed economies. Soundness of banks is scored 6.0 bringing Czech Republic into the 14th place, trustworthiness and confidence of financial market is scored 5.2 (22nd place).

Financial Market Development in Czech Republic.
Chart 5. Financial Market Development in Czech Republic. Source: WEF.
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Banking Industry Country Risk

Banking Industry Country Risk Assessment (BICRA) is a methodology designed by Standard&Poor's "to evaluate and compare global banking systems". A BICRA is scored on a scale from 1 to 10, ranging from the lowest-risk banking systems (group 1) to the highest-risk (group 10). The BICRA methodology has two main analytical components: "economic risk" and "industry risk". Each of the components is then further divided into 3 "factors" that result in an economic and industry risk score for each country.

Czech Republic is included into group '4' with economic risk scored '4' and industry risk scored '4'.

BICRA Group 4
Economic risk 4
    Economic resilience intermediate
     Economic imbalances intermediate
    Credit risk in economy intermediate
Industry risk 4
    Institutional framework intermediate
    Competitive dynamics intermediate
    Systemwide funding intermediate
Government support assessment supportive

Table 1. BICRA for Czech Republic. Source: S&P's.

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Deposit Guarantee Scheme

Deposit Guarantee Schemes compensate certain deposits held by depositors of a bank that becomes unable to meet its obligations.

From a depositor's point of view it is important to know:

  • if the depositor is eligible within the terms of the deposit guarantee scheme;
  • if the depositor's bank is a participant in the deposit guarantee scheme;
  • if the depositor's type of deposit is covered by the deposit guarantee scheme.

All these details about deposit guarantee scheme in Czech Republic are summarised in Table 2.

Scheme Participantsall credit institutions operating in Czech Republic, branches of Czech banks abroad
Scheme Exemptionsbranches of foreign banks (covered by their home countries)
Eligible Depositorsnatural persons, legal entities
Covered Accountscurrent accounts, savings accounts, term accounts, deposit accounts, saving books
Covered Currenciesall (Czech crowns and foreign currencies)
Maximum Protected Amount100 000 EUR
Paid In CurrencyCZK

Table 2. Deposit guarantee scheme in Czech Republic.

Further Information:
Deposit Guarantee Schemes in Europe

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Country Ceiling for Deposits

Moody's country ceilings for deposits specify the highest rating that can be assigned to local- or foreign- currency denominated deposit obligations of a bank or other deposit taking institution domiciled within that country.

Local currency (Czech koruna) deposit ceiling for Czech Republic is set to Aa2 (high grade), foreign currency deposit ceiling is A1 (upper medium grade).

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Deposit Rates

In Aug 2016, an agreed annualised deposit rate in local currency (Czech koruna) of new contracts with agreed maturity up to 1 year between credit institutions and households was 1.07% .

Deposit Rates in Czech Republic.
Chart 6. Deposit Rates in Czech Republic. Source: ECB.

Further Information:
Compare Bank Deposits in the Czech Republic

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Banking Sector Structure

Currently there are 58 credit institutions operating in Czech Republic.

Recent structural changes (2013 - 2015) of the banking sector of Czech Republic are summarised in Table 3.

201320142015
Number of Opened Banks112
Number of Closed Banks111

Table 3. Recent structural changes in the banking sector of Czech Republic.

All the credit institutions operating in Czech Republic can be classified into several categories. Table 4 summarises the number of banks in each category.

CategoryNumber of Banks
Banks17
Branches of foreign banks23
Building societies5
Central banks1
Credit unions3
Savings and loan associations1
Savings associations8

Table 4. Number of banks by category in Czech Republic.

The list of the most recently opened banks in Czech Republic is provided in Table 5.

There are 23 branches of foreign banks from 11 different countries in Czech Republic. Table 6 shows 10 countries having the biggest number of branches in Czech Republic.

Country of OriginNumber of Branches
 Austria6
 Germany4
 United Kingdom3
 Netherlands2
 Slovakia2
 Denmark1
 France1
 Hungary1
 Poland1
 Ireland1

Table 6. Number of branches of foreign banks in Czech Republic grouped by country of origin.

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