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(Notification of NBS No. 212/2001 Coll. on issue of the Decree amending and supplementing the Decree of NBS No. 3/2000 on Liquidity Rules for Banks and Branches of Foreign Banks)
The NBS, by its Decree on Liquidity Rules for Banks and Branches of Foreign Banks, stipulates indicators of liquidity with the aim of ensuring continuous solvency of banks and branches of foreign banks, whereas liquidity means the ability to convert assets into cash with the purpose of proper and timely satisfaction of payment commitments.
The amendment to the decree contains in particular certain legislative and technical specifications and a change in definitions of some terms.
Pursuant to the amendment to the Decree on liquidity rules for banks and branches of foreign banks, highly liquid assets mean securities that are accepted by whichever central bank to secure loans or similar transactions, including governmental treasury bills, governmental bonds and treasury bills issued by the central bank.
According to the new decree, the highly liquid assets do not include e.g. gold, commercial receivables and discountable bills of exchange.
A bank can provide loans, which are not fully secured, to persons with a special relationship to the bank or provide guarantees for loans or guarantee commitments of such persons towards third parties otherwise, only if its capital adequacy is higher than 8% in total, and up to the amount in which its capital and reserves exceed 8% of the adjusted value of risk-weighted assets, but not more than 20% of its capital and reserves.
However, this provision does not apply to (i) persons with a special relationship to the bank, which are the banks with their registered seat in an OECD country; (ii) total sum of loans provided by the bank to its employees on more favourable conditions, whereas this sum cannot exceed 5% of the registered capital of the bank.
This decree is in force from 20 June 2001, apart for the provision redefining the term 'monthly assets', which will be effective from 15 August 2001.
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