* Countercyclical buffer rate rises to 1 pct from July 2018
* C.bank says increase due to rapid credit growth
* Seeking law to help it stay ahead of mortgage market
* Says banking sector highly resilient to potential shocks
(Adds quotes, banks, more on law, details)
By Robert Muller and Jason Hovet
PRAGUE, June 13 The Czech central bank on
Tuesday said it was doubling the amount of money domestic banks
must put aside as a precaution for hard times from July next
year because of rapid credit growth.
The move comes as a bill allowing the central bank to make
lenders cap loans, if needed, is at risk of failing in
parliament, drawing sharp criticism from the bank's Governor
Jiri Rusnok on Tuesday.
Czech lending growth is close to the fastest since 2009 as
record low interest rates spur demand, especially in housing,
where low supply and cheap mortgages have driven up prices on
new apartments in Prague by a fifth in the past year.
Economists and real estate experts have yet to call it a
bubble but, seeking to get ahead of problems, the central bank
has taken steps such as giving banks recommendations to limit
mortgage sizes - for which it now wants legal power to enforce.
The bank has also set a countercyclical "bad times" buffer
rate on banks of 0.5 percent valid from this year which will
double to 1.0 percent from July 2018. The bank said it stood
ready to increase the rate or cut it, depending on developments.
"We are a country where property prices are probably rising
the fastest in the whole European Union, so risk features are
clearly present on the horizon," Rusnok told reporters. "That is
why we are trying to react and approach this reasonably."
He added the bank would have decided to raise the buffer
rate regardless of the state of the draft law in parliament.
Czech banks made it through the global financial crisis
almost a decade ago relatively unscathed and remain highly
capitalised but some have cut back dividends in reaction to
higher capital requirements.
The biggest banks in the country are CSOB, owned by
Belgium's KBC, Ceska Sporitelna, owned by Austria's
Erste Group Bank, and Komercni Banka, owned
by France's Societe Generale.
Prague-listed shares of Komercni Banka and Moneta Money Bank
were little changed on Tuesday.
Lending strength has been helped by strong economic growth
and the lowest unemployment in the European Union, boosting
wages. But rising house prices, especially in Prague, are
beginning to exclude some from the market.
The draft bill would allow the central bank to cap loans
according to debt-to-income, debt-servicing-to-income and
loan-to-value ratios. Opponents say it will shut young couples
and families out of the market.
Since April, the bank has recommended banks provide
mortgages that should not exceed 90 percent of property values.
In its annual financial stability report, the central bank
said the banking sector remained resilient to potential shocks
and would maintain solid capital adequacy even in a "very
unlikely" adverse scenario projected by stress tests.
(Additional reporting by Petra Vodstrcilova; Editing by Jeremy