CNB withdraws Business Credit Union’s license and proposes liquidation

The Czech National Bank (CNB) has revoked the Business Cooperative Credit Union’s (PDZ) license to operate as a savings and credit cooperative due to persistent and serious operational deficiencies. The decision, which takes legal effect today, has prompted the CNB to petition the court for the dissolution of PDZ, the initiation of its liquidation, and the appointment of a liquidator, the bank announced in a press release.

Effective immediately, PDZ is prohibited from accepting deposits, issuing loans, or conducting any activities beyond those necessary to settle its obligations and claims. These restrictions have been in place since March 15, 2024, following a preliminary injunction by the CNB. The injunction limited PDZ’s ability to manage assets and liabilities, including restrictions on cash operations.

The CNB’s decision stems from a review conducted between August 2023 and April 2024, which uncovered significant and ongoing issues. PDZ failed to meet basic standards for managing credit and operational risks and demonstrated poor governance. Moreover, the credit union was found to have systematically violated laws related to preventing money laundering and the financing of terrorism.

PDZ is a small entity within the Czech financial sector. As of December 31, 2024, it had fewer than 50 members, client deposits amounting to less than CZK 1 million, and a total balance sheet of CZK 65 million. By comparison, the Czech credit union sector, comprising five entities, had 12,000 members, CZK 6.8 billion in client deposits, and a total balance sheet of CZK 9.3 billion as of September 30, 2024.

In December 2024, PDZ proposed appointing Petr Koritsch as Chairman of its Board of Directors, seeking CNB approval to retain its license. Koritsch, a former executive with UBS Bank’s Czech branch, was nominated to replace the late Chairman Robert Zelenka, who led PDZ since 2021 until his passing in June 2024. Despite these efforts, the CNB proceeded with the license withdrawal.

PDZ’s membership has declined sharply, from 139 members in December 2023 to just 44 by the end of 2024. The credit union’s small size, with assets under CZK 150 million, means its potential collapse poses no risk to the broader stability of the Czech financial market, according to the CNB.

From June 2015 to November 2020, Prime Minister Petr Fiala (ODS) held a deposit of CZK 950,000 in PDZ, which constituted a membership share. Fiala did not disclose this in his asset declaration, explaining that he had not realized his deposit automatically conferred membership in the cooperative.

The CNB’s decision to revoke PDZ’s license underscores its commitment to maintaining the integrity and stability of the Czech financial system. The credit union’s dissolution and liquidation proceedings now await judicial approval.

Source: CTK