Supervision bodies in the Czech Republic will merge into the central bank Czech National Bank (CNB) in the first quarter of 2006.
Currently, the CNB supervises banks, the Ministry of Finance (MF) regulates insurance companies and pension funds, the Securities Commission (SEC) the capital market (i.e. custodians, securities dealers, asset managers) and UDZ is responsible for small saving entities.
The newest merger plans diverge from original proposal, which focused on two phases, according to Czech Republic Head of Custody fo BA-CA Vit Cermak: first, the merger of UDZ into CNB and MF into SEC, both in 2006, followed by the merger of CNB and SEC in 2010, after the EUR currency is accepted.
Now, a project to consolidate the supervision already in 2006 has been introduced. Czech Deputy Finance Minister, Mr. Tomas Prouza, responsible for financial markets, said: “We were looking for a technically best solution without any ideology in order to introduce an institution that would be able to care for the stability of the whole financial sector. Foreign experiences, which show advantages of the consolidated supervision, played also its role.”
He added, “The change to the time-schedule has not been done without proper analysis and detailed discussions. The structure of supervision is discussed in details in our market as well as abroad and it is important to apply theoretical models to the situation in the respective market. And that is what we are doing, including minimising costs and providing the superior functioning of supervision.”
The plan is supported by the opposition, therefore legal amendments, which will be necessary, are supposed to be approved in the Parliament without any delay. Market analysts and representatives of market players also commented positively. That way, duplicity in enquiries from various regulators and in reporting to the entities can be avoided, according to Cermak.