The Czech lower house voted on Wednesday to allow the central bank to buy a wider selection of assets in the market from a bigger range of counterparties, expanding the bank’s toolkit.
The Czech National Bank has sought the legal change for years although its approval was hastened as the coronavirus crisis hammers the country’s economy amid a lockdown on daily life and business.
The bill must still go to the upper house, the Senate.
The bank has said it does not plan to use the new mandate to start any asset purchases at the moment, but the fact that it was proposed to be rushed through parliament had already helped support the bond market amid ramped up borrowing.
The Finance Ministry has sold a massive 213 billion crowns ($8.56 billion) worth of bonds in the past two weeks – more than a widened deficit target of 200 billion – as it loaded up for deep budget losses from the crisis and response measures.
Under the changed law, the bank will have greater scope to buy state and corporate and mortgage bonds but also a wide range of other assets and commodities, and from counterparties including pension and insurance firms, as well as institutional investors.
So far, the bank has been limited to operations with banks, and with only some assets.
The central bank had argued the changes were a response to the previous financial crisis and were in line with operations of the European Central Bank.
The law does not remove a ban on monetary financing through direct debt purchases from the government.
The bank has said it was not planning to start quantitative easing now but it wanted to have the tool ready.
Via Reuters
