Final Word from Tuesday, June 30, 2015



Medical insurers are unhappy about a plan by the cabinet to require them to move their bank accounts to the Czech National Bank. Finance Minister Andrej Babiš sees this as a way for the state to improve its cash management and reduce its borrowing costs, but the health insurers complain that it would deprive them of their interest income. At the same time, the CNB is concerned about the "underdiversification" of the supply of high-quality crown-denominated assets. Simply put, the CNB worries that Czech banks are too heavily invested in central-bank and government debt. Vice Gov. Vladimír Tomšík told HN that the goal is for them to reduce this weight in relative terms by investing in viable loan projects. The medical insurers could use a similar argument against Babiš. If they are all required to put their money at the CNB, the sector as a whole will be underdiversified and will be more vulnerable in the event of crisis. [Czech Republic diversity]

Glossary of difficult words

to put all of one's eggs in one basket - to risk everything on the success of one venture;

underdiversification - the state of not being sufficiently diversified; the state of having too large a percentage of one's assets invested in a single instrument or entity;

vulnerable - susceptible to physical, financial or emotional harm.

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