Czech Republic: EU accession - financial services

Czech Republic
What changes have already been made to the Czech Republic's laws on financial services?
  • the division of insurance activities into life and non-life insurance business, although existing composite insurers may continue to operate for a further eight years
  • changes in rules relating to insurance of bank deposits – inclusion of companies, exclusion of related parties, the limit for deposits to be insured increased to the amount required by EU (EUR 25,000)
  • capital adequacy, solvency, prudent-man rule of investment and supervision on a consolidated basis introduced/amended for banks so that this is now in line with EU directives
  • regulation of maximum time for a bank money transfer introduced, connected liability for damage / interest to be paid in the case of a delay
  • the office of Financial Arbitrator established and rules regarding proceedings between banks and their clients before him set out – this is intended as an alternative to proceedings before a court and is designed to be cheaper and less formal
  • conditions for operating of foreign investment funds and companies introduced - licencing principle (licences granted by Czech Securities Commission)
  • nation-wide credit information system and insurance information system introduced (in compliance with regulations on personal data protection) allowing banks and insurance agencies to inform each other about their clients in order to protect their own interests.

What changes to Czech financial services law come into effect on accession?

Some other changes that are currently in draft form, or have already been passed, will come into force upon Czech accession to the EU:

  • the principle of a single licence under which EU banks can operate in the Czech Republic will be introduced
  • EU based investment funds and companies will be able to operate in the Czech Republic on the basis of passport arrangements
  • EU based securities brokers will be able to operate in the Czech Republic on the basis of exchange of passport arrangements
  • close cooperation and information by supervisory bodies (Czech National Bank, Securities and Exchange Commission on the side of the Czech Republic and corresponding bodies on the other side) will be introduced.

What can you do to ensure you comply with the new law and prepare for accession?

  • all Czech service providers in the financial sector must be aware of tougher competition in their industry due to the removal of market entry barriers and the introduction of single licence principles
  • on the other hand, all Czech service providers in the financial sector can take advantage of the right to enter the EU-wide market by means of establishing branches or providing services directly
  • Czech corporations should be aware of the possibility to take advantage of easier EU-harmonized public offerings of securities
  • Czech investment funds and companies, pension funds and insurers should be aware of the  relaxation of rules regarding the investment of their portfolio into non-Czech assets.

 

For further information please contact Hilary McDowell.