Banking

The banking sector in the Czech Republic is a performing and profitable business, playing a key role in the development of the Czech economy. During the global financial and economic crisis in 2008-2009, it showed a high degree of stability along with significant levels of innovation and development of banking services, while maintaining business profitability.

Although this financial market segment is currently quite concentrated (five major players control up to 90% of the market), further consolidation is possible, particularly depending on mergers and acquisitions taking place outside of the country or ownership structure changes resulting from government recovery efforts primarily in EU member countries.

Following the Czech Republic’s accession to the EU, there has been a pronounced trend of foreign banks penetrating the Czech financial market by expanding their branch networks based on a single EU-wide licence. This trend has had a positive impact on the competitive environment and on the domestic banking sector development.

Industry Issues

• New regulatory framework and banking oversight infrastructure within the EU (effects of the financial crisis and efforts to strengthen capital, improve liquidity and introduce preventative and anti-cyclic measures)
• Implementation of Pillar 2 – capital adequacy according to Basel II (particularly in the ICAAP area – Internal Capital Adequacy Assessment Process)
• Introduction of IFRS – in particular IFRS 9 which replaces IAS 39 and is going to have a major impact on credit risk management
• Implementation of the new Law on Payment Systems requirements and SEPA standards
• Rise in default payments, restructuring and bankruptcies
• Increase in the volume of unpaid debt
• Non-performing loan portfolio management and collection process system management in all of its phases
• Drop in debt recovery success rate
• On-going efforts to improve economic and operational efficiency indicators in banks
• Pressure from parent banks to lower costs and curtail investments
• Public pressure to lower bank fees

Industry-specific services

• Advisory and implementation services in relation to ICAAP (according to Basel II)
• Advisory and implementation services in relation to the new Law on Payment Systems
• Money laundering prevention, fraud investigation and forensic accounting
• Improvement of the collection process, debt recovery services for lenders and restructuring project management for debtors
• Valuation of loans
• Sale of overdue loans
• Introduction of financial reporting according to IFRS and implementation of new IFRS standards in the area of financial instruments
• Financial regulatory advice, capital adequacy and regulatory compliance
• Effective tax balance sheet restructuring
• Development of tax-efficient retail and commercial products (eg. cash pooling, financial derivatives) and financial arrangements (eg. leasing, factoring)
• Optimisation of provisions and reserves resulting from the change of accounting and tax rules
• Finance structuring – local and international group financing via subordinated debts, profit participating loans, hybrid financing, and analysis of transactions with securities and shareholdings
• Tax and legal reviews of financial instruments (e.g. derivatives, hedging, syndicated loans, securities and life insurance products)
• PayWell compensation survey for the Financial Services sector
• Optimisation of support services (finance, HR, purchasing, IT), creation of shared-service centers, outsourcing
• Business restructuring
• Customer and product profitability management, reporting and controlling processes quality improvement