1. How do you perceive the regulatory tsunami, which has had an impact on banks in the recent years?
I would not really call it a tsunami. Tsunami is something destructive, but many regulations bring something good. I would rather call it a flood because there have been so many regulations in recent years. I believe, and the financial crisis has clearly demonstrated it, that the financial sector needs regulation because it often embark on making risky trades, even if they are contrary to rational decision-making of investors. Therefore some regulation maybe should be even tougher. However, I perceive such a large amount of regulation negatively, for several reasons:
2. Which regulations had the greatest impact on banks?
Due to the cumulative effects of individual regulations, as I mentioned, it's hard to say.
3. Many regulations (Basel) also had an impact on banks' capital requirements. Were these requirements excessive?
I deem that what is included in CDR IV is correct. However now comes the next wave of regulatory changes that make capital requirements stricter and I am not too sure about their accuracies. As I said, the regulation comes too quickly. The impacts of the CRD IV have not been assessed yet (also due to the fact that in it there are many transitional periods to continue even after 2020) and already more changes are introduced.
4. What is your opinion on the fact that sometimes the domestic regulator (CNB) is even tougher than the EU one?
I think that given what had happened here in the 90's there is no surprise. It seems to me that this severity is desirable, and the regulation and supervision of the CNB is in the right direction, our banks practically do not bankrupt. However we could have a discussion about the credit union sector.
5. Lots of regulations are based on certain stress scenarios. Aren’t these scenarios sometimes too catastrophic?
They are not. Life shows us that the reality is in many cases different from the past and expected developments. Therefore it is necessary to construct stress scenarios even for the situations that now seem to be almost impossible.
6. How do you perceive the new regulation of the mortgage market by the CNB?
Do you think that it could really be a bubble? Yes, it certainly can occur due to the current situation in the real estate market. Rapidly rising real estate prices can create a bubble. However the question is whether this proposed CNB regulation can prevent it. It is already known how to circumvent the regulation.
7. This year it is ten years since the supervision of the capital and the insurance markets has been unified under the CNB. How do you see this move?
I perceive this move rather positively. The Czech Republic is not so big to have so many qualified specialists in different areas at the same time. Therefore it is a good that a central place where knowledge and procedures can be shared was created. Additionally, it seems to me that the boundaries between banking and insurance are becoming thinner. On the other hand, it is true that a lot of power is concentrated in one place, which in terms of the theory of democracy is not always desirable. But it seems that the benefits of centralization in our environment are rather prevalent.
8. ARM also deals with Solvency II. What do you think about it delayed adoption in the Czech Republic?
Definitely it is not a good sign for the Czech Republic. It is a pity that internal political disputes prevented us from honouring the commitments arising from our membership of the EU.
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