CZECH REPUBLIC Trends and Developments Contributed by: Filip Čabart, Štěpán Černý, Filip Šperl and Lukáš Janečka, HAVEL & PARTNERS
HAVEL & PARTNERS s.r.o., advokátní kancelář Florentinum A Na Florenci 2116/15
110 00 Praha 1 Czech Republic Tel: +420 255 000 111
Email: office@havelpartners.cz Web: www.havelpartners.com
Increase in EUR Financing in the Czech Republic/ Interest Rates In recent years in the Czech Republic, it has been pos- sible to observe a trend in the field of external financ- ing, where there has been an increase in the volume of external financing of Czech companies by banks in foreign currencies, in particular in euros (EUR). According to data from the Report on Financial Mar- ket Developments in 2024 prepared by the Ministry of Finance of the Czech Republic, from the end of 2019 to the end of 2024, the share of foreign currency loans to non-financial corporations increased by 19.1 per- centage points, and in 2023 the share of foreign cur- rency loans to non-financial corporations surpassed loans provided in Czech crowns. In 2024, the year-on- year increase in the share of foreign currency loans was 1.3 percentage points, reaching 52.5%. This is a consequence of the increase in interest rates by the Czech National Bank (CNB) due to high infla- tion (in 2022, the local interest rate climbed as high as 7%). The euro-denominated loans thus became significantly cheaper for Czech companies, leading to a sharp increase in the volume of euro financing in the Czech Republic by the banks. This high interest rate persisted until December 2023. Since then, there has been a gradual decrease in the local interest rate set by the Czech National Bank (CNB) to the current value of 3.50% (as of the date of publication of this guide), while the European Central Bank (ECB) main refinanc- ing rate is 2.15% (as of the date of publication).
The advantage of euro-denominated loans for Czech companies thus continues to be lower interest rates, although this difference is gradually decreasing. Nevertheless, even with potentially more favourable interest rates, external financing in euros (EUR) is not suitable for all companies and brings certain risks for Czech companies. The greatest of these is currency risk. Euro-denominated loan financing is not suitable for companies without income in euros. In view of the potential weakening of the Czech koruna (CZK) against the euro (EUR), this could lead to a significant increase in the cost of the loan, and such unpredict- able fluctuations can significantly affect the cash flow of the Czech borrowing company. Although currency risk can be mitigated through appropriate hedging, the associated costs may, to a certain extent, offset the benefit of lower interest rates on euro-denominated loans. Therefore, it can be concluded that Czech companies that have business partners in the eurozone, export to the eurozone and generate income in EUR may benefit from euro-denominated financing. Alternative Possibilities of Financing Focused on Intra-Group Financing The demand for corporate bank financing among Czech companies increased significantly in 2024. According to a survey by the Czech National Bank (CNB), presented in the Bank Lending Survey I/2025, the largest increase in demand for loans from non-
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