CZECH REPUBLIC Law and Practice Contributed by: Stanislav Šimek, Vojtěch Mlynář and Jakub Dostál, BADOKH
4. Online Lenders 4.1 Differences in the Business or Regulation of Fiat Currency Loans Provided to Different Entities Consumer lending is the most heavily regulated fin - tech segment, in which the lawmaker has imposed a comprehensive set of borrower protections (eg, man - datory disclosure obligations, an obligation to assess creditworthiness before granting credit, a 14-day right of withdrawal, and the right to repay early at any time with limited penalty). Lending to businesses and professional counterpar - ties is largely left to civil law. Where lending is conducted through crowdfunding, the crowdfunding platform must hold a licence from the CNB. 4.2 Underwriting Processes Underwriting processes vary across lending types and are partially dictated by regulation. In commercial lending, lenders conduct due diligence proportionate to the size of the loan. Standard checks include publicly available insolvency and enforcement registries and published accounting statements, sup - plemented by external databases where needed. In consumer lending, lenders are required to assess the creditworthiness of the borrower before granting credit. In practice, banks rely on internal credit scor - ing models, income verification and checks against external databases and credit registries. In crowdfunding, platforms are required to conduct a credit risk assessment and disclose the results to prospective investors. 4.3 Sources of Funds for Fiat Currency Loans The most common source of loan funding is deposits collected from the public. Only entities with a banking licence may collect deposits. Lenders can also raise capital through equity or debt issuance and deploy the proceeds as loans. Public offerings generally require a prospectus approved by
Where services are provided in relation to crypto- assets regulated under MiCA that do not qualify as financial instruments, the CMUA licensing regime does not apply. However, providing investment advice or portfolio management in relation to such assets constitutes a regulated service under MiCA, for which CNB authorisation may be required. Where a robo-adviser advises solely on physical com - modities, no licence is required. However, commodity derivatives remain financial instruments and sectoral regimes may apply depending on the commodity. 3.2 Legacy Players’ Implementation of Solutions Introduced by Robo-Advisers The Czech robo-advisory market remains modest in scale. Traditional financial institutions are adopting automated solutions gradually, often through fintech partnerships rather than large-scale internal transfor - mation. On the fintech side, Portu, originally a venture of investment bank WOOD & Company, has been offer - ing robo-advisory services since 2018, through auto - mated portfolio construction that is tailored to individ - ual client profiles. Fondee and other fintech platforms operate on a similar model. 3.3 Issues Relating to Best Execution of Customer Trades Where robo-advisers execute client orders in relation to financial instruments, the investment firm is subject to the best execution requirements and must take all the necessary steps to obtain the best possible result for the client, having regard to factors such as price, costs, speed and likelihood of execution. Investment firms using robo-advisers are subject to an overarching duty to act in the client’s best interest when handling transactions. They must maintain and implement a robust order execution policy, monitor execution quality on an ongoing basis, and justify their choice of execution venues to demonstrate continuing compliance. Similar obligations usually apply to crypto-asset ser - vice providers where robo-advisers execute orders in relation to crypto-assets.
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