5. BANKING SECTOR
IN THE CZECH REPUBLIC
BANKING SECTOR
• All bank institutions and their mutual interactions
form the core of the Czech financial market
• Two-tier banking system:
– central bank – ensures macroeconomic stability
– commercial banks – run their business to make profit
• Czech National Bank (CNB)
– with its headquarters in Prague
• CNB functions:
– Bank of banks
– Fiscal agent
– Monetary policy
– Supervision of
– Capital market
– Foreign exchange
• Provide wide range of bank services for individuals
and companies
• Are responsible to the central bank
• Make profit unlike the CNB
Their functions:
- Accepting deposits
- Granting loans
- Payment and clearing services
- Collecting business information
- Medium- and long-term investment
- Transferring money
- Safe custody of valuables and important documents
• are focused on specific activities such as savings or
mortgages or can have supportive functions, e.g.:
– Czech-Moravian Guarantee and Development Bank
– Czech Export Bank
– European Bank for Reconstruction and Development
DEPOSITS
• Demand (sight) deposits
– can be withdrawn without any notice or penalty
• Term (time) deposits
– are deposits with a fixed term (penalty is paid
before its maturity)
• Savings deposits
– are kept for a stated period of time, cannot be
used directly as money
BASIC TERMINOLOGY
• Currency - coins and banknotes within a particular
country (medium of exchange)
• Convertibility – the ease of exchanging one currency
to gold or another currency
• Bank profit – surplus resulting from the difference
between interests from deposits and loans, and
charging customers for bank services