• Remedial Measures an Penalities
• Compulsory Administration

Banking Supervision

Banking supervision over activities of banks and branch offices of foreign banks is executed by NBS.

In the new Banking Act, performance of banking supervision is regulated on an individual basis, as well as on a consolidated basis. Banking supervision on a consolidated basis does not substitute supervision over individual persons included in the consolidated unit. Neither performance of banking supervision over banks on an individual basis, nor supervision over other financial institutions and insurance companies is substituted by the banking supervision on a consolidated basis.

The banking supervision on a consolidated basis shall mean monitoring and regulation of risks of consolidated units and sub-consolidated units, parts of which are banks, for the purpose of limitation of risks to which a bank is exposed due to its participation in a consolidated or a sub-consolidated unit.

NBS performs banking supervision on a consolidated basis over a banking consolidated unit as well as over a banking sub-consolidated unit.

NBS performs banking supervision on a consolidated basis also over a financial consolidated unit if a legal entity controlling the consolidated unit is a financial institution which is not subject to supervision under a special regulation and over a financial sub-consolidated unit if a legal entity controlling the sub-consolidated unit is a financial institution which is not subject to supervision under a special regulation.

In connection with introduction of provisions on performance of banking supervision on a consolidated basis, the new Banking Act stipulates definitions of terms such as consolidated unit, banking consolidated unit, financial consolidated unit, sub-consolidated unit, banking sub-consolidated unit, and financial sub-consolidated unit.

A list of financial institutions controlling consolidated units and sub-consolidated units is maintained by NBS and sent by it to the Office for Financial Market.

Remedial Measures an Penalities

For purposes of fulfilment of its function, NBS disposes with sufficient instruments for performance of remedial measures under the new Banking Act in case that a bank or a branch office of foreign bank does not fulfil e.g. measures of prudent conducting of business activities, breaches generally binding legal regulations or threatens creditors of the bank and the entire banking system.

If NBS finds out deficiencies in activities of a bank or a branch office of foreign bank consisting in failure to fulfil conditions stipulated in its banking licence or in a decision on prior approval of NBS, requirements or obligations arising from other decisions of NBS laid on the bank or the branch office of foreign bank, or failure to fulfil requirements under the new Banking Act, NBS may impose, depending on importance, extent of responsibility for and nature of found deficiencies, save for a call on adoption of measures for remedy, withdrawal of banking licence, limitation or suspension of performance of certain banking activity, establishment of compulsory administration or imposition of other measure, also a penalty on the bank or the branch of the foreign bank up to the amount of SKK 10,000,000 and in case of repeated and serious deficiencies up to the amount of SKK 20,000,000.

NBS may also impose a penalty on the member of the statutory body of the bank, member of the Supervisory Board of the bank, manager of the branch office of the foreign bank, deputy manager of the branch office of the foreign bank, procurist, head employee of the bank or of the branch office of foreign bank, administrator for performance of compulsory administration or his/her deputy, for breach of duties arising from the new Banking Act, special regulations or other generally binding legal regulations relating to performance of banking activities, from the Articles of Association of the bank and other internal acts of management, or for breach of requirements or obligations laid by a decision issued by NBS, whereas the penalty depending on importance, extent of responsibility for and nature of breach. The penalty may be imposed up to the amount of twelve times of monthly average of total earnings of such person for the previous year obtained from the bank or the branch office of foreign bank and from members of consolidated unit or members of sub-consolidated unit, to which the bank or the branch office of foreign bank belongs.

A penalty of maximum 50% of twelve times of monthly average of total earnings of such person for the previous year received from the bank or the branch of foreign bank and from members of consolidated unit or members of sub-consolidated unit to which the bank or the branch of the foreign bank belongs, may be also imposed on the head employee. The bank or the branch office of foreign bank is obliged to recall the person, who became an untrustworthy person under the new Banking Act by effective imposition of a penalty, without undue delay.

The statutory body of a bank which adequacy of own resources decreases under 8% is obliged to submit to NBS a binding recovery programme within 30 days from discovery of such decrease. The binding recovery programme has to be approved by the statutory body and the Supervisory Board of the bank. NBS is obliged to approve or reject the binding recovery programme within (10) ten days from its delivery.

Compulsory Administration

The new Banking Act further contains detailed provisions on reasons, purpose, conditions and progress of compulsory administration, whereas a possibility of establishment of compulsory administration over a branch office of foreign bank is excluded. At the same time, specifications of operation of the bank in course of established compulsory administration compared to ordinary banking business are regulated in details. Furthermore, the Act regulates a procedure at and after withdrawal of a banking licence, as well as a procedure of liquidation of the bank.

If a bank is wound up by liquidation, only NBS is authorised to file an application for appointment and recall of its liquidator.

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