CNB cuts red tape: 36 rules and reporting duties to be scrapped by year-end

An analysis conducted by the Czech National Bank (CNB) in the area of financial market regulation has revealed that Czech legislation in some cases unnecessarily goes beyond the EU minimum requirements. Based on this analysis, the CNB will abolish 36 rules set out in decrees and reporting duties by the end of 2025. In addition, the CNB will propose to the Ministry of Finance the elimination of various legal obligations applying to financial market participants.

The CNB is to cut red tape. This decision is based on the results of an analysis of gold plating in financial market regulation conducted by specialised units of the CNB at the Bank Board’s request. Gold plating refers to cases where Czech legislation imposes additional obligations and restrictions on market participants in areas governed by EU law going beyond the EU minimum requirements.

“The Bank Board is delivering results for our country. When we started in mid-2022, inflation was at 17.5%. Now it’s back on target. We’re also leading by example – we’re cutting costs. We’ve laid off five per cent of our staff, including managers reporting directly to the Bank Board (B−1 executives). We also said we would cut red tape. We’ve approved a package of 36 financial market regulatory measures that we will abolish this year. These include various reporting duties, official information documents and requirements in decrees that the CNB had previously imposed in excess of European regulations. This will reduce bureaucracy and simplify doing business in the financial market,” said Czech National Bank Governor Aleš Michl.

In its analysis, the CNB compared the EU requirements with various domestic laws, decrees and official information documents. In many cases, it found that domestic legislation goes beyond the requirements of EU law. However, these deviations are often justified by the specificities of the domestic market. Therefore, provisions where the benefits of reducing the regulatory burden outweigh the risks have been proposed for repeal.

Within its powers, the CNB will repeal 36 now redundant rules and reporting duties by 31 December 2025. The aim is to simplify and streamline the financial market regulatory framework. For example, the often-criticised affidavit of legal capacity will no longer be required, some unnecessary reporting duties will be abolished, and market participants will benefit from the scrapping of other superfluous rules.

As substantive obligations are established by law and changes to laws fall outside the CNB’s remit, the CNB will also propose amendments to several laws to the Ministry of Finance with the aim of further easing the burden on financial market participants.

Jakub Holas
Director, CNB Communications Division

The 36 rules and reporting duties that the CNB will abolish by the end of 2025

The CNB will cut red tape in the financial sector and will abolish 36 redundant rules and reporting duties by 31 December 2025. An analysis has revealed that domestic regulation often goes beyond EU requirements without this always being necessary. As a result, the CNB will abolish rules where doing so will generate greater benefits than risks. The aim is to make the regulatory environment simpler and more transparent and to eliminate burdensome administrative duties falling within the CNB’s remit.

The CNB will abolish the following rules and statements:

1. Demonstration of legal capacity by affidavit. It is sufficient to provide the financial institution’s internal assessment of the suitability of the person assessed, along with information from basic registers in the case of Czech citizens. Abolishing this requirement will reduce the administrative burden.

2. More detailed requirements for credit risk management by credit institutions, especially details on the transaction execution system, the credit risk measurement and monitoring system and credit risk management limits. The CNB regularly subjects credit institutions to the supervisory review and evaluation process (SREP), in which it evaluates their credit risk management. Abolishing these requirements will thus not affect the quality of supervision of credit institutions. On the contrary, it will reduce the administrative burden on credit institutions.

3. More detailed requirements for market risk management by credit institutions, especially details on the market risk measurement and monitoring system, market risk management limits and market risk stress testing. The CNB evaluates market risk management by credit institutions in the SREP. Abolishing these requirements will thus not affect the quality of supervision of credit institutions. On the contrary, it will reduce the administrative burden on credit institutions.

4. More detailed requirements for liquidity risk management by credit institutions, especially details on the liquidity risk measurement and monitoring system, liquidity risk management in major currencies and limits, financial resource management and market access, liquidity risk management scenarios and liquidity crisis contingency plans. The CNB evaluates liquidity risk management by credit institutions in the SREP. Abolishing these requirements will thus not affect the quality of supervision of credit institutions. On the contrary, it will reduce the administrative burden on credit institutions.

5. More detailed requirements for operational risk management by credit institutions, especially details on the operational risk management system, operational risk identification, assessment, monitoring and reporting, operational risk mitigation, contingency planning, information systems and technologies, and security principles. The CNB evaluates operational risk management by credit institutions in the SREP. Abolishing these requirements will thus not affect the quality of supervision of credit institutions. On the contrary, it will reduce the administrative burden on credit institutions.

6. More detailed requirements for risk management outsourcing by credit institutions, especially details on the outsourcing risk management system, outsourcing implementation and selected outsourcing cases. The CNB evaluates outsourcing risk management by credit institutions in the SREP. Abolishing these requirements will thus not affect the quality of supervision of credit institutions. On the contrary, it will reduce the administrative burden on credit institutions.

7. More detailed requirements for internal audits at credit institutions, especially details on the internal audit charter, the organisational integration of internal audit and the analysis of audit risks and planning. The CNB evaluates credit institutions’ governance systems – including internal audit as one of credit institutions’ control functions – in the SREP. Abolishing these requirements will thus not affect the quality of supervision of credit institutions. On the contrary, it will reduce the administrative burden on credit institutions.

8. More detailed requirements for information disclosure by credit institutions, specifically details on information about the credit institution, its shareholder structure, the structure of the group to which it belongs, and its activities and financial situation. The CNB has sufficient information to perform supervision. Abolishing these requirements will reduce the administrative burden on credit institutions.

9. More detailed requirements for asset assessment by credit institutions, specifically quarterly assessments of the sufficiency of provisions and reserves for loans provided and other selected assets and off-balance sheet items and adjustments of their amount, and details on collateral for provisioning purposes. The CNB evaluates the sufficiency of credit institutions’ capital to cover expected losses on their assets in the SREP. Abolishing these requirements will thus not affect the quality of supervision of credit institutions. On the contrary, it will reduce the administrative burden on credit institutions.

10. More detailed requirements for reports on audits of credit institutions’ governance systems, especially details on their content, structure and format. If necessary, the CNB as an administrative authority may request the provision of information needed to perform supervision. Abolishing these requirements will reduce the administrative burden on credit institutions.

11. More detailed requirements for information disclosure by insurance and reinsurance companies, specifically details about the insurance company or reinsurance company, its shareholder structure, the structure of the group to which it belongs, and its activities. The CNB has sufficient information to perform supervision. Abolishing these requirements will reduce the administrative burden on insurance and reinsurance companies.

12. More detailed requirements for reports on audits of insurance and reinsurance companies’ governance systems, especially details on their content, structure and format. If necessary, the CNB as an administrative authority may request the provision of information needed to perform supervision. Abolishing these requirements will reduce the administrative burden on insurance and reinsurance companies.

13. The requirement for the administrator of a public real estate fund to report to the CNB information about the professional experience and education of members of the expert committee. The CNB does not approve members of expert committees and considers it sufficient if information about them is provided in the annual report. Alternatively, the CNB may request this information in the course of supervision.

14. The requirement for the manager of a standard fund to ensure that its management body is informed without undue delay about each breach of limits that would jeopardise compliance with the manager’s accepted level of risks and the standard fund’s risk profile. The duty to provide an effective solution to breaches of limits and to remedy such breaches will not be affected by the change. However, the specific configuration and internal escalation will be left to the manager’s discretion.

15. The requirement for the statute of a public real estate fund to contain information about the professional experience and education of members of the expert committee, information about the dates of commencement of their terms of office and an identification of the member designated as the depositary. The staffing of the expert committee is an internal process that does not need to be specified in detail in the statute.

16. The reporting duty for banks and foreign bank branches based on the “Report of a bank/foreign bank branch on loan and deposit concentration” supervisory statement, in the form of the cancellation of the section concerning reporting on loans. Abolishing this duty will reduce the administrative burden.

17. The reporting duty for banks and foreign bank branches based on the “Annual profit distribution statement of a bank/foreign bank branch” supervisory statement. Abolishing this duty will reduce the administrative burden.

18. Reporting duty for Pan-European Personal Pension Product providers based on the “Report for Czech National Bank supervision” supervisory statement. Abolishing this duty will reduce the administrative burden.

19. Reporting duty for the Pan-European Personal Pension Product distributors based on the “Information on the activities of a Pan-European Personal Pension Product distributor” supervisory statement. Abolishing this duty will reduce the administrative burden.

20. Reporting duty for investment fund managers based on the “Structure of assets of a managed fund” supervisory statement, as this aggregate information can mostly be calculated from more detailed information contained in other statements. Abolishing this duty will reduce the administrative burden.

21. Reporting duty for European long-term investment funds based on the “ELTIF10” supervisory statement. Abolishing this duty will reduce the administrative burden.

22. Reporting duty for domestic insurance companies based on the “Eligible basic own funds to cover the notional Minimum Capital Requirement” supervisory statement. Abolishing this duty will reduce the administrative burden.

23. Official Information of 19 August 2016 regarding the pursuit of business in the financial market – cloud computing. This Official Information is not necessary under the current regulation.

24. Official Information of 27 May 2011 regarding the pursuit of business in the financial market – operational risk in the area of information systems. This Official Information is not necessary under the current regulation.

25. Official Information of 29 December 2010 regarding the prudential rules for banks, credit unions and investment firms. The Measurement of Operational Risk, the Calculation of the Operational Risk Capital Requirement. This Official Information is not necessary under the current regulation.

26. Official information of 3 August 2021 regarding overall discretions pursuant to the CRR. This Official Information is not necessary under the current regulation.

27. Official Information of 8 July 2021 on the performance of the activities of banks, credit unions, branches of banks from a non-Member State and some other entities – disclosure of information. This Official Information is not necessary under the current regulation.

28. Official Information of 27 December 2011 regarding the evaluation of an auditor of a bank, credit union, insurance company and reinsurance company by the Czech National Bank. This Official Information is not necessary under the current regulation.

29. Official Information of 10 June 2015 regarding the Czech National Bank’s approach to the assessment of the annual report, annual accounts and the auditor’s report on the governance system of credit unions in connection with the amendment of Act No. 333/2014 Coll. on Credit Unions as from 1 July 2015. This Official Information is not necessary under the current regulation.

30. Official Information of 15 April 2008 regarding mandatory liability insurance for damage caused during game hunting. This Official Information is not necessary under the current regulation.

31. Official Information of 30 September 2009 publishing the list of foreign supervisory authorities and foreign administrative authorities with which the CNB has signed a memorandum of understanding on financial market supervision. This Official Information is not necessary under the current regulation.

32. Official information of 4 December 2009 regarding certain rules of conduct towards private pension scheme participants and persons interested in entering into a private pension policy. This Official Information is not necessary under the current regulation.

33. Official Information of 10 December 2010 regarding the pursuit of business in the financial market: Qualitative requirements relating to the conduct of business – fundamental information. This Official Information is not necessary under the current regulation.

34. Official information of 17 January 2014 regarding the conditions of admissibility of inducements in the distribution of certain products on the financial market. This Official Information is not necessary under the current regulation.

35. Official Information of 19 September 2014 on quality management and control in the distribution network of an insurance intermediary. This Official Information is not necessary under the current regulation.

36. Official Information of the Czech National Bank of 5 June 2015 regarding the procedure of credit unions in connection with a change in conditions relating to deposits in credit unions as from 1 July 2015. This Official Information is not necessary under the current regulation.