Czech Republic - Banking and securities

The Czech National Bank (CNB) is the country's central bank, charged with issuing currency and regulating the state's commercial banking sector. Since mid-1996 domestic credit and M2 growth have fallen sharply. Growth in M2 stood at 7.8% at the end of December 1996, well below the central bank's 13-17% growth target for 1996 and in the middle of its 8–12% target range for 1997.

In the mid-1990s, there were 36 commercial and savings banks in the Czech Republic. The state had one state financial bank, 21 Czech joint-stock companies, 6 partly owned foreign banks, and 7 foreign banks. The new Czech Export Bank commenced operations in late 1996. The International Monetary Fund reports that in 2001, currency and demand deposits—an aggregate commonly known as M1—were equal to $15.3 billion. In that same year, M2—an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual funds—was $42.3 billion. The money market rate, the rate at which financial institutions lend to one another in the short term, was 4.69%. The discount rate, the interest rate at which the central bank lends to financial institutions in the short term, was 4.75%.

The origins of the first exchange in Prague go back to the 1850s when foreign exchange and securities were the principal trading products. An exchange trading securities and commodities was established in 1871. The volumes traded at the exchange fluctuated considerably and in 1938 official trading was suspended. After World War II the operation of the Prague Exchange was not restored and in 1952 the Exchange was officially abolished. In 1990 eight banks became members of the Preparatory Committee on Stock Exchange Foundation. In 1992 this institution transformed itself into a stock exchange. The Prague Stock Exchange has been trading debt securities (mostly government and bank issues) since April 1993. Volume in mid-1993 was Kc18 million, of which two-thirds were listed issues. Leading Czech banks include: Ceská sporitelna (Czech Savings Bank), Investicní a poštovní banka (Investment and Postal Bank), Komercní banka (Commercial Bank), and the Ceskoslovenská obchodní banka (Czechoslovak Commercial Bank).