The Czech Banking System in the Light of Regulation and Supervision: Selected Issues

This paper focuses on the current issues linked to the goals of banking regulation and supervision. The banking supervision policy carried out in transition countries – Central and Eastern Europe – takes into account a range of specific phenomena. The key distinctive factor of banking supervision and regulation in these economies was until recent the absence of a market-oriented banking system. This meant that banking supervisors actually had to establish "the rules of the game" and ensure "a level playing field" for all participants in a given financial market. In the Czech Republic, this period in banking supervision could be labelled as a "learning by doing" process. The CNB has amended the legislative framework regarding commercial banks, with the primary goal of implementing the EU Directives. Although the present situation in transitional economies is far from that of standard economies, we argue that remarkable progress has been made in creating a legislative framework regarding the prudential operation of commercial banks since the beginning of the 1990s.