Banks backing out of Czech bonds
20. 6. 2016 | Source: BusinessInfo.cz
A glance at the current assets of the domestic banks shows that their Czech state bond holdings are dissolving. By the end of April they stood at CZK 520bn, the lowest value since December 2011.
Since January this year alone, the bond volume has shrunk by around CZK 32bn, or more than five percent, according to finance ministry statistics. In their quest for more rewarding profits than can be earned on government debt securities, the banks are parking money at the Czech National Bank [ČNB], where the capital better appreciates.
“The income earned on state debt is losing its appeal. Therefore the bond volume in the holdings of the banks is gradually declining. At this time, deposits placed with the central bank are in fact connected to lower costs than investing in government bonds,” said Raiffeisenbank spokesman Tomáš Zavoral.
The banks earn yearly interest of 0.05 percent on ČNB deposits. That amounts to more than can be drawn from two and three-year Czech state bonds. “The money the banks have gained from their matured bonds is being directed to the ČNB, while they are practically not purchasing any newly issued bonds,” said J&T Banka analyst Milan Vaníček.
The latest figures show marked growth in deposits sent to the ČNB by the Czech financial institutions. Solely in the period running to the end of April this year, they deposited CZK 293bn, meaning their overall deposits have grown by about a third since December 2015.
Originally published in E15 weekly, economic and business newsmagazine. Author: Jaroslav Bukovský