jan frait : twenty years of financial stability at the czech national bank opening remarks by mr jan frait, deputy governor of the czech national bank, at the czech national bank workshop on financial stability and macroprudential policy, prague, 17 december 2024. * * * we meet here today – first of all – to celebrate 20 years of financial stability at the czech national bank ( cnb ). in may 2004, the cnb board endorsed the key features of our financial stability function : its mandate and objective, the definition of financial stability, the content of financial stability analyses and the meaning of macroprudential policy. it also announced the foundation of a financial stability team in the research department. it is not easy to find traces of the original decision in the public domain. we were a bit secretive about it at the time. this was because there wasn't full support in the board for this strange thing called " macroprudential ". there was also limited support for it in the regulation and microprudential supervision departments back then. as a matter of fact, i revealed that we had set up a financial stability function to a local audience in january 2005 at the earliest, in my presentation on the conclusions of the 2004 financial stability report. this presentation was only published in czech, as we did not think anyone would be interested – except for the bank for international settlements ( bis ), which had the same idea on its agenda. you may ask why the board decided to establish a financial stability function anyway. one reason was a severe banking crisis that had occurred between 1997 and 2000, which had its roots in macroeconomic mismanagement, among other things. the other – and potentially more important – factor was the influence of certain bis economists that some of us admired. the bis chief economist william white had given an impressive lecture in this congress centre in 2003. that may have been the lucky breaking point. just as a matter of interest, in may 2004 the cnb adopted the following definition of financial stability : a situation in which the financial system ( a ) fulfils its functions without disturbances and negative effects on the present and future development of the economy, and ( b ) at the same time shows a high degree of resilience to adverse shocks. this definition is still in place after 20 years. simply perfect right off the bat. one more important thing happened 20 years ago. in may 2004, the government approved a plan to integrate the then fragmented supervision of the

ales michl : policy for a strong koruna speech by mr ales michl, governor of the czech national bank, at the cnb discussion forum, faculty of economics and administration of masaryk university, brno, 23 november 2022. * * * dear vice - rectors, dear dean, esteemed representatives of academia, honoured guests, today i would like to speak about how to achieve a strong currency. our country should have a strong koruna. in early 2000, we were paying 36 koruna for the euro. a large inflow of foreign investment was taking place. the trade balance was improving. the koruna was following a gradual appreciation trend. in the eight years from 2000 to july 2008, the currency strengthened to czk 23 to the euro. that was its last peak. in other words, the strongest - ever level against the euro was achieved fourteen years ago. no major strengthening has occurred since. the appreciation trend of the koruna halted in 2008. between 2013 and 2017, we even went through a devaluation, a forced weakening of the koruna. 1 at the time, the exchange rate was even weaker than czk 28 to the euro. the problem is that we switched from exports, foreign investment inflows, hard work and productivity to consumption, debt and an entitlement economy2 in which we ask the state to sort everything out and foot the bill. this needs to change. a strong koruna should become a priority – a long - term priority – for the government and the czech national bank. what is needed to make the koruna strong? more accurately, what is needed for the koruna to start following an appreciation trend again, like it did before 2008? you can view this as a mathematical equation with three variables. x + y + z = strong koruna i define these three variables as monetary policy, fiscal policy and long - term growth policy. to achieve the result, all three variables, the three policies, x + y + z, must act together, in concert and at the same time. it's not enough to have just one of them. first policy for a strong koruna – monetary policy monetary policy affects economic activity with a lag of more than a year. this lag complicates the decision - making and communication of inflation - targeting central banks. let's assume there is no lag in transmission. in that case, it would be enough to stop raising