Capital Adequacy and the Role of Profit in It

23.14 %
Total Capital Ratio
20.96 %
CET1 ratio

Comment by the Czech Bar Association

The total capital ratio in the first quarter of 2026 fell to 23.1%, compared with 23.2% in the previous quarter. It thus remains above the average ratio of 18.6% from the pre-COVID period of 2015–2019, and the average over the past five years was 22.9%.
In the case of the highest-quality CET1 capital, the capital ratio relative to the banking sector’s risk-weighted assets stands at 21%, essentially unchanged from the 21% in the previous quarter and thus above the 17.7% ratio from the pre-pandemic period of 2015–2019. The average over the past five years was 21%.
Banks’ retained earnings (a component of CET1 capital) of CZK 434 billion represent 57% of total bank capital, which reached CZK 756 billion in the first quarter of 2026. Retained earnings accounted for 52% of total capital during the pre-COVID five-year period, while this share stood at 57% over the past five years.
While in 2018 the central bank’s capital requirements amounted to 15.3% of risk-weighted assets (RWA) or CZK 384 billion in absolute terms, by the end of 2025 they had reached 16.6% of RWA, or CZK 526 billion—an increase of CZK 142 billion.

Capital Adequacy and the Role of Profit in It

% of risk-weighted assets

CBA Monitor
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Source of primary data

CNB Arad

Category

Banking sector

Data frequency

quarterly

Note

Total Capital = Tier 1 (CET1 + AT1) + Tier 2.
Tier 1 capital is better able to absorb losses; it primarily consists of CET1 capital (comprising equity, retained earnings, and reserves) and AT1 debt capital (which can absorb losses more easily than Tier 2 capital).
The data also includes figures for banks and branches of foreign banks providing services in the Czech Republic, as well as data for branches of banks operating abroad.

Related charts

Banking Sector Assets
Profitability of the Banking Sector

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Comments

CNB tightens banks' capital buffer. Responds to faster credit growth and new risks, including fiscal
Jaromír Šindel 04. 06. 2026

The countercyclical capital buffer should rise to 1.5% from July 2027, which will increase banks' total capital requirements to around 17% next year, in response to continued growth in lending to households and firms and lower perceived risks in the banking sector. Again, we are also seeing stronger wage growth outpacing productivity. In the case of rising investment credit, however, this is a dilemma for macroprudential policy. In addition to the financial cycle, the results of stress tests, including concerns about the interconnectedness of the banking and government sectors, are likely to have factored into the decision. It leaves mortgage rules unchanged.

Loans are mainly driven by mortgages, which is why the CNB left the countercyclical reserve at 1.25%, but with the risk of an increase
05. 03. 2026

The current growth in credit activity is mainly driven by mortgage lending, on which the countercyclical buffer has a more limited impact. Although there was also a recovery in lending activity to non-financial corporations last year, these are still rather early signs of recovery and the economy needs stronger investment activity outside construction. These reasons are probably behind the central bank's decision to leave the countercyclical buffer in banks' capital unchanged at 1.25%, but with the caveat of a growing likelihood of a future increase.

Higher house prices spark richer debate over central bank macroprudential policy than first appears
15. 12. 2025

Comment by Jaromír Šindel, Chief Economist of the CBA: According to the Czech Statistical Office, realised prices of older flats in the Czech Republic rose by 3.7% quarter-on-quarter in the third quarter, which exceeds income growth for the seventh quarter already and maintains the too brisk annual pace of property prices at around 16%. Higher property prices are also making their way into the CNB's macroprudential capital policy settings, with discussion over the (arguably unscary) possible introduction of a sectoral systemic buffer, as well as less intuitive discussions over the role of investment activity by non-financial corporates in setting the countercyclical capital buffer.