As a preliminary measure, the Czech National Bank has prohibited the credit union WPB Capital from accepting deposits, paying out settlement shares and entering into new credit agreements or extending existing ones. The prohibition against accepting deposits does not apply to accepting repayments of existing loans, so the CNB's preliminary measure in no way affects the returns on the credit union's lending transactions. The CNB's prohibition also applies to the recruitment of new credit union members.
"Following a thorough assessment of the situation, and taking into account the seriousness of the shortcomings detected in the credit union's business, the CNB decided it had to prohibit or restrict the performance of these activities by the credit union. Above all, this means that members cannot deposit money with the union," said CNB spokesman Marek Petru.
"The CNB made this decision to protect the deposits of the union's members," said Mr Petru. The CNB is not authorised to provide more detailed information until the administrative proceeding against the credit union is concluded with a final decision.
The prohibition against accepting deposits does not apply to payments made by members in repayment of obligations under credit agreements. WPB Capital members should therefore avoid falling into arrears on existing loans.
Answers to frequently asked questions (available in Czech only) about credit unions are available on the CNB's website at www.cnb.cz.
In a preliminary measure of 15 May 2013, the CNB imposed on WPB Capital a prohibition against entering into new credit agreements, including making any changes, amendments or additions to existing credit agreements other than those leading to the immediate or accelerated repayment of existing loans, and with the exception of forced restructuring demonstrably resulting in a higher probability of full and timely repayment of a claim on a relevant debtor. Furthermore, the CNB imposed on this credit union a prohibition against any action or lack thereof resulting in automatic renewal of an obligation to provide a loan, an obligation to provide a further loan tranche or an extension of the maturity of an existing loan. In addition, the credit union is prohibited from accepting deposits from its members, accepting initial member deposits and other member deposits, and paying out settlement shares upon a decrease in an additional member deposit or the issuance of consent to an agreement on the transfer of membership rights. Under the preliminary measure, the credit union must refrain from any conduct consisting in acquiring (purchasing) assets with a risk weight higher than 0% (a 0% risk weight) pursuant to Annex 4 of Decree No. 123/2007 Coll., on prudential rules for banks, credit unions and investment firms, as amended, with the exception of assets necessary to ensure day-to-day operations and with the exception of making deposits with banks pursuant to Article 1(1) of Act No. 21/1992 Coll., on Banks, as amended, and with banks having their registered offices in member states of the European Union. The credit union should also refrain from disposing of assets or encumbering assets with any rights of third parties.
The Czech National Bank is the central bank of the Czech Republic and the supervisor of the Czech financial market. The primary objective of the CNB is to maintain price stability. The CNB sets monetary policy, issues banknotes and coins and manages the circulation of currency, the payment system and settlements between banks. It also performs supervision of the banking sector, the capital market, the insurance industry, pension funds, credit unions, electronic money institutions and consumer protection, as well as foreign exchange supervision. The CNB has offices in Prague, Plze