Banking in the Czech Republic - from crises to stability

Abstract

he transition period towards a market economy in the Czech
Republic was accompanied by unfavourable effects on the banking system.
Many small banks fell into trouble, and problems accumulated in the
largest banks. The central bank was first involved in the resolution of
banking crises as a lender of last resort, though its role was gradually
taken over by the state. The last economic and financial crisis had only
limited impact. Together with the changing banking system, the monetary
policy of the central bank also evolved from the monetarist transmission
mechanism to inflation targeting. Three main areas are theoretically and
practically analysed, including the Central bank’s role in rescuing the
banks, the link between monetary policy and the profit or loss of the Czech
National Bank, and the impact of a specific form of quantitative easing on
the Czech banking system.