PRAGUE, June 10 (Xinhua) -- Czech government approved on Monday an amendment to the Act on the Czech National Bank (CNB), giving the central bank legal rights to regulate credit indicators for mortgage loans.

Currently, the CNB regulates the mortgage market only in the form of recommendations that are not legally binding. The aim of the amendment is to enable the central bank to respond in a timely manner to potential macroeconomic risks, such as a real estate bubble or overheating of the mortgage market, which could distort financial stability.

"The aim of the amendment is to enable the CNB to fulfill its mandate of maintaining the stability of the financial sector in the future," said CNB Governor Jiri Rusnok. "The legally binding nature of mortgage regulation is essential to ensure a level playing field and prevent unfair competition. If foreign or non-bank providers were to enter the mortgage market to a greater extent, enforcing the rules set out in the recommendation would not be as effective as domestic banks," the governor adds.

Another important point of the proposed amendment is to enable the CNB to carry out a wider range of monetary policy transactions. The amendment also foresees an extension of the CNB's international cooperation, as well as clarification of some reporting and statistics provisions, including the treatment of confidential statistical data, said the CNB on its website.

Similar legally binding limits on credit indicators already apply in a number of other European Union countries, such as Slovakia and Austria.

The amendment still needs to be approved by Parliament and signed by the President. Enditem

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