The banking sector has changed much during the last twenty years both in the number of banks and the system as a whole. All banks operating in the Czech Republic form a two-tier banking system basically divided into a central bank and numerous commercial banks. While the central bank called the Czech National Bank is not intended to earn profit the other banks are mostly private companies established to make profit.

The Czech National Bank (CNB) with its headquarters in Prague serves both the government and the other banks. It ensures macroeconomic stability within the country through carrying out monetary policy, i.e. policy which affects the cost and availability of money and credit. This bank works as a “bank of banks“ so it offers the same services for the other banks as those offer to the general public, e.g. it accepts deposits and makes loans. In addition, it issues currency and manages the circulation of currency.

Being a fiscal agent, the CNB provides financial services for the government and so enables it to deal with the amounts of money connected with taxation or selling bonds.

Within its monetary policy, the CNB safeguards the value of the national currency, that is it changes money supply in the country depending on the rate of inflation. The CNB also supervises the capital market and deals with foreign exchange activities.

Commercial banks provide a wide range of services for individuals and companies. Unlike the CNB, their activities are aimed at making profit. They are responsible to the central bank.
Commercial banks can be divided into two main groups, universal and specialised commercial banks.

Universal commercial banks offer most of the services banks are required to in general. They accept deposits and grant loans, they run customers´ accounts, ensure all payment and clearing operations, transfer money, offer services connected with exchanging foreign currency. The list of their activities usually contains some other services such as custody of valuables and important documents or collecting business information.

Specialised commercial banks are focused on specific activities such as savings, mortgages and others. Some of these banks are:

• Czech Export Bank which aims to support Czech exporters;
• Czech- Moravian Guarantee and Development Bank provides assistance to small and medim-sized enterprises;
• European Bank for Reconstruction and Development was founded to assist the transition of our economy in the 1990s.

The major activities of the banks for the general public consist of services connected with clients´ deposits. There are different deposits depending on how accessible they are for the clients.

Demand (sight) deposits range among the most common ones. Their advantage lies in their accessibility. They can be withdrawn without any notice or penalty.
Term (time) deposits have a fixed term, the money can only be withdrawn after the term while withdrawing before its maturity you pay a penalty.
Savings deposits belong to specific ones which are kept in a bank for a stated period of time so they cannot be used directly as money.

Currency are coins and banknotes used within a particular country (a medium of exchange).
Convertibility is the ease of exchanging one currency to gold or another currency.
Bank profit depends on its activities. In general, it is a surplus resulting from the difference between interests from deposits and loans and from selling bonds, and charging customers for bank services.