Interest Rates and Corporate Financing: How Central Bank Decisions Affect Corporate Loans and Investments

JUDr. Jakub Dohnal, Ph.D., LL.M.
JUDr. Jakub Dohnal, Ph.D., LL.M.
24.4.2026 | ARROWS law firm

Decisions of the Czech National Bank on interest rates directly affect the cost of corporate loans and companies’ ability to invest. Higher rates make borrowing more expensive, forcing businesses to seek euro-denominated financing. This changes the structure of corporate indebtedness. The article provides answers on how to understand the impacts and how to protect yourself against refinancing risks and currency fluctuations.

The illustrative image shows an expert addressing the issue of the impact of interest rates.

Current interest rate environment and CNB monetary policy

The Czech National Bank (CNB) gradually reduced its monetary policy rates during 2025 and in early 2026. According to the CNB’s latest forecast for 2026, the two-week repo rate—the key reference rate for the entire economy—should range between 2.50% and 3.00%.

This rate is not a meaningless number—it is the price at which banks borrow from the central bank. Banks then gradually pass this cost on to their clients through interest rates on loans.

To be clear: this is not the inflation rate, but the price of money in the economy. When the central bank raises rates, borrowing becomes more expensive—not only for companies, but for everyone. When it lowers them, the process reverses and loans become cheaper.

The issue, however, is that there is a time lag between the central bank’s decision and the actual impact on your mortgage instalment or business loan, as well as a filter in the form of competition in the banking market. Banks cannot afford to lose clients by increasing margins too much, but at the same time they need to cover their costs and risks.

How CNB rates are transmitted into the pricing of bank loans

Economic theory and banks’ practical experience show that there is a so-called monetary policy transmission mechanism. Simply put: when the CNB changes its base rate, banks gradually change rates on loans and deposits. It is not immediate, and it is not always proportional, but the trend is clear.

In practice, it works like this: a bank borrows from the CNB, for example at 3.00%, and provides you with a business loan at 5.5% to 7% (depending on your creditworthiness and the type of loan). The difference between these rates is the bank’s margin—this is what the bank uses to cover its costs, default risk, and profit.

A key finding from recent years: during the period when the CNB significantly raised rates (2022–2023), the average interest rate on newly granted CZK-denominated loans to companies peaked at 9.12% in October 2022.

Since then, the Czech economy has felt the burden of these high rates—companies significantly reduced investment.

The situation began to change in 2025 and continues in 2026. The CNB is gradually lowering rates, which is reflected in lower rates in banks’ offers. The average rate on new CZK-denominated business loans is therefore gradually decreasing, but it still remains at a historically higher level than in the period before 2022.

Related questions on central bank monetary policy

1. How often does the CNB change its interest rates and who decides?
The CNB Bank Board meets at regular intervals (usually once every six weeks) and votes on the level of monetary policy rates. The decision is announced publicly and is always accompanied by a press release and a press conference.

You can find this information on the CNB website and it is also covered in economic news reporting. If, as a business owner or manager, you follow CNB decisions, you have a chance to anticipate changes in the banking market and decide in time whether to borrow (if a rate cut is expected) or rather take on debt now (if rate increases are expected).

2. What is the relationship between the CNB repo rate and the rate on a mortgage or business loan? The repo rate is not directly identical to the interest rate a bank will offer you. It is more of a “base rate” that sets the tone in the interbank market.

Put simply: if the CNB raises the repo rate by one percentage point, banks usually raise their rates by a slightly smaller amount (say, by 0.7–0.9 percentage points) because they want to remain competitive. In any case, a change in the repo rate leads to a change in loan interest rates.

3. Do CNB decisions also affect interest on savings accounts and term deposits?
Yes. A higher repo rate means that banks have more money and are willing to offer you higher interest on deposits. A lower repo rate usually leads to lower interest on savings accounts. This is another transmission channel—through deposits and savings.

The state of corporate financing in the Czech Republic – a trend towards the euro

While there is talk of falling interest rates, the reality of corporate financing in the Czech Republic points to a deeper problem. Czech companies are gradually “euroising”.

In 2015, foreign-currency loans (especially in euros) accounted for roughly 22% of all bank loans to Czech companies. In 2022, this was already about 37%, and estimates for 2025 suggest further growth—potentially up to half.

These figures are often analysed by the CNB in its financial stability reports.

This is not a natural development caused by companies suddenly needing to finance purchases in the eurozone. It is a pragmatic response to the fact that Czech CZK-denominated loans have long been five to eight percentage points more expensive than euro loans.

Why? Because during the “inflation shock” period of 2022–2024, the CNB raised interest rates much more aggressively and earlier than the European Central Bank (ECB). At certain points, the difference between CNB and ECB rates reached as much as seven percentage points.

For a company that needs to borrow CZK 50 million to expand production, this is a difference of tens of millions of Czech crowns over the repayment period. The result? Companies prefer to borrow in euros from their foreign parent companies or from European banks.

The problem this brings, however, is more complex. A euro-denominated loan means the company is exposed to exchange-rate risk. When the Czech koruna weakens against the euro (which happens at certain times), the amount owed in CZK effectively increases, even though nothing has changed in the euro amount of the debt.

Moreover, foreign-currency loans tend to be drawn primarily by large companies and companies with foreign ownership. Small and medium-sized enterprises that cannot access euro financing have to make do with a more expensive domestic CZK loan.

The result is a structural distortion—sound and prudent domestic companies cannot afford investments, while less promising companies with euro financing can expand without difficulty. This is not a healthy state for the Czech Republic’s long-term economic growth.

Practical impact on corporate investment and economic growth

Governments and analysts are speaking with concern about one trend: Czech companies have stopped investing. In 2019, when the average interest rate on CZK loans was around 3%, companies took out roughly CZK 418 billion in new loans from banks.

In recent years, these figures have fallen dramatically. Companies prefer to wait until loans become cheaper rather than invest at today’s high rates.

For example, the construction of a new hall, the refurbishment of technological equipment, and the purchase of machinery are stalling—everything has shifted into waiting mode.

“The economy needs investment. Companies are not very keen on it because of expensive loans,” note analysts at the Czech Chamber of Commerce. In other words: high interest rates have a dampening effect on the economy.

When companies do not invest, they have no reason to hire new employees. Without new employees, consumption stagnates. Without investment in new technologies, productivity declines. And without productivity, wages cannot rise. This is how an economic slowdown is created.

The Czech National Bank’s forecast for 2026 shows that things are, however, starting to change. Inflation should remain below 2 percent and gross domestic product should grow by around 3 percent.

These figures look decent, but reality is sometimes more complicated. Growth will be driven mainly by domestic demand (companies and households will buy more), while the export sector will rather hold growth back. Companies are still reluctant to invest in long-term development.

Related questions on the impact on corporate investment

1. Does lowering interest rates automatically mean that companies will borrow and invest more?
No, not necessarily. Companies look at the broader context: the market situation, the stability of demand for their products, global geopolitical tensions, tariffs, and other factors. Lower interest rates are only one element in decision-making.

Many entrepreneurs who remember the high rates from 2022–2024 profited from them (they had high margins) and are now waiting for the situation to truly settle. Moreover, according to CNB forecasts, rates are declining only gradually—this is not a revolution, but a gradual decrease.

2. What is the difference between a fixed and a variable interest rate on a business loan?
A fixed rate guarantees that the interest will remain the same for the duration of the fixation period (usually 1–5 years), even if market conditions change.

A variable rate changes with the market—typically set as the PRIBOR rate plus the bank’s margin. If you expect rates to fall, a variable rate may bring savings. If rates rise, you will pay more.

For long-term investment financing, companies usually prefer fixed rates so they know what costs to plan for.

3. Should I borrow now (in 2026) at current rates, or wait for a further decline?
That depends on your specific situation. If you have a project that generates profit and can service the loan even at current rates, you should finance it. If the project is barely surviving under current economic conditions, waiting for lower rates makes sense.

Ideally, have an expert prepare an analysis—attorneys and financial advisors from ARROWS, a Prague-based law firm, can help assess contractual terms and financial impacts, including “what-if” scenarios.

Refinancing mortgages and business loans – a wave of changes on the horizon

One of the most pressing topics of 2026 is the refinancing of mortgages and long-term loans that were granted during the period of low rates. The math is simple—and painful.

Many households and companies took out loans in 2020–2022 at average rates of around 2.0–2.8 percent. These loans were arranged with an interest-rate fixation for 2–3 years.

And it is precisely in 2025–2026 that the fixation periods end and borrowers have to “refinance” their loans—i.e., agree on a new rate.

The problem: the new rates come from the current market. Instead of 2.8 percent, rates around 4.7 percent await. That means an increase in the monthly instalment of 20–30 percent.

Example: a family that was paying a mortgage of CZK 10,000 per month will now pay CZK 12,000–13,000 per month for the duration of the fixation over the next two to three years.

The Czech National Bank analysed how this will affect households and concluded that, given the current economic trajectory, it will be painful, but it should not lead to massive mortgage defaults. People will adapt to the situation. Still, in aggregate, this amounts to millions of Czech crowns.

A similar situation also awaits companies that borrowed operating loans with a variable rate. Each increase in the CNB repo rate is gradually reflected in their repayments.

From a legal and contractual perspective, three things are important for companies:

First, it is necessary to carefully read what happens after the fixation ends. Standard agreements contain clauses on “automatic extension” or “the bank offering a new rate”. If you are not sure about the wording, it is wise to have it reviewed by an attorney so you know where you stand. Put differently: if you are not borrowing, you do not need to worry about it—but if you are, it is something to pay attention to.

Second: if rates have become too high, you often have the right to “refinance” the loan—i.e., transfer it to another bank that offers better terms. This process is not free (there are arrangement fees), but if the difference in rates is significant, it may be worth it.

Third: there are also cases where the agreed rate is so irrational that a request to reduce it may be brought before a court. However, this is a complex legal issue that you never handle on your own.

Risks and challenges associated with changes in monetary policy

It is time to say it out loud: changes in a central bank’s monetary policy are not just numbers on a chart. They have real impacts on the money in your company.

Potential issues

How ARROWS can help (office@arws.cz)

Unexpected increase in instalments: If you have a variable-rate loan and the CNB raises rates, your instalment will increase even if your business performance remains the same. This can push the company’s results below profitability.

We will help you review the contractual terms and analyse refinancing options. We will also provide a legal opinion on whether the contractual terms conflict with good morals or regulatory requirements.

Currency risk: If you have a loan in euros and the Czech koruna weakens against the euro, your debt effectively increases in CZK terms. Again, this is not an issue of your performance, but purely of exchange-rate movement.

We will set up contractual clauses to minimise currency risk. We will oversee hedging arrangements and ensure that business decisions are not unnecessarily exposed to currency shocks.

Refinancing difficulties: When you want to move the loan to another bank for a better rate, but the original bank “holds” you back with high early repayment penalties.

Simply put: you should not even end up in a situation where early repayment penalties are disproportionate. If you are already in that position, we will negotiate with the original bank or secure a route to refinancing without excessively high penalties.

A business debt trap: When high interest rates continue to distort the structure of corporate financing and small businesses cannot invest, while large companies with euro financing can afford to do so, this creates a competitive disadvantage.

We will advise you on how to structure your company’s debt so that it remains sustainable in the long term, even if rates change. At the same time, we will keep you informed about any new measures by the state or the CNB that could improve your situation.

Failure to finance new projects: If a new investment loan becomes too expensive for you, and competitors (especially those with foreign participation) can borrow more cheaply, you will fall behind in the market.

We will help you design a financing strategy that is not dependent solely on traditional bank loans. We will assist you in preparing documentation for other sources of financing—leasing, intra-group loans, equity financing, or state support schemes.

Forecast and expected developments

Economists and analysts at the Czech National Bank agree that interest rates should continue to decline gradually in the coming months. According to the CNB’s February 2024 forecast (the latest available forecast relevant for 2026), inflation in the first quarter of 2026 will be 1.6%, which is significantly below the 2% target. The economy should grow at around 3% per year.

Based on these figures, it can be expected that:

The decline in the repo rate will continue. Individual decisions of the CNB Bank Board will gradually reduce the repo rate, and according to the forecast, by the end of 2026 the repo rate could be in the range of 2.50–3.00%.

Average rates on business loans will gradually fall. From a peak of 9.12% in 2022, average rates have already decreased partly, but they still remain high. With further CNB steps, they will continue to decline—experts expect a drop to the 5–6% level during 2026.

Mortgages will become cheaper, but not dramatically. Standard mortgages are slightly below 5%. However, this is still relatively high compared to historical standards.

According to experts, central banks “will keep interest rates at a higher level than we were used to in the previous decade”. So even if the situation improves, it will not be like 2010–2019.

The problem: companies will not immediately regain confidence to invest. Even if interest rates fall, companies that experienced the years 2022–2024 will not start investing aggressively right away. They will be cautious and wait until the situation truly stabilises. This means that while rates are declining, investment dynamics may not increase immediately.

Consumer Credit Act – new protection from November 2026

The Czech government is preparing an amendment to Act No. 257/2016 Coll., on Consumer Credit, which is to take effect from 20 November 2026.

This is the transposition of the new European Directive (EU) 2023/2225 of 2023 on consumer credit, which strengthens consumer protection and changes the rules for loans.

Key measures include:

Setting a significant reduction of the maximum annual percentage rate of charge (APR) for consumer credit compared to the previous regulation, the exact level of which will be set by implementing regulations.

However, it will be set at a level intended to prevent extremely expensive loans and will be significantly lower than what was historically possible.

Strengthening the assessment of the consumer’s actual ability to repay. The new law focuses not only on formal errors by the provider, but on whether the debtor truly has the ability to repay.

If a consumer obtains a loan that they cannot afford to repay, they may not be bound by such a loan and will repay only the principal, which strengthens protection against irresponsible lending.

Extension to interest-free credit. Newly, even interest-free credit (so-called buy now, pay later services) will be regulated—providers and intermediaries will have to be authorised and comply with all rules of the Consumer Credit Act.

For companies, this means that if they provide any intra-company loans or employee benefits in the form of credit, they should review these terms carefully.

Also, if your company draws consumer credit (regardless of the fact that it is a legal entity), it should be aware of the new rules, including in light of the broader interpretation of the term “consumer” in certain cases.

Final summary

Interest rates are not just an economic abstraction—they are real money you must pay to finance your business. The Czech National Bank’s decisions on the repo rate are gradually reflected in the rates banks offer you for business and investment loans.

During 2022–2024, there was a dramatic increase in rates, which led to a paralysis of investment by Czech companies. Companies are gradually shifting towards cheaper euro-denominated financing, which brings new risks in the form of exchange rates and dependence on foreign capital.

At the same time, the economy is beginning to recover, the CNB is gradually cutting rates, and loans are becoming cheaper. Optimistically, it can be said that we are approaching a turning point when rates will be at a level companies can bear and will be willing to invest again.

In practical terms, however, as a business owner, manager, or investor you need to:

  • Understand the state of your own financing—what agreements you have, what interest you are paying, and what refinancing lies ahead.
  • Monitor CNB decisions and know what developments are expected from them.
  • Be prepared for changing conditions and have a plan for how to respond.

If you are not sure whether your contractual terms are fair and safe, if you do not know the impact of refinancing on your cash flow, or if you want a legal analysis of possible ways to optimise your financing, it is time to turn to experts.

The attorneys at ARROWS, a Prague-based law firm, are familiar with Czech National Bank data, understand the monetary policy transmission mechanism, and can help you review contractual terms, analyse risks, and negotiate with banks.

This is not just legal advice – it is practical protection for your business against unnecessarily expensive financing and hidden contractual risks.

Contact ARROWS, a Prague-based law firm, at office@arws.cz and have us prepare an analysis of your situation. It is worth it.

Related questions on interest rates and business financing

1. Does this mean that in 2026 I can borrow more cheaply than in 2025?
Yes, on average. Although rates are declining gradually and not every bank will reduce its margins at the same pace. We recommend comparing offers from several banks and renegotiating the terms with your bank advisor.

The attorneys at ARROWS, a Prague-based law firm, can help analyse the offered terms and compare them with the market. Contact us at office@arws.cz.

2. What risk does a euro-denominated loan carry?
Primarily exchange-rate risk. If the Czech koruna weakens against the euro, the agreed euro amount will increase for you in koruna terms. For example: you have a debt of EUR 1 million. When the exchange rate is CZK 25 per euro, that is CZK 25 million.

If the koruna weakens to CZK 26 per euro, the debt suddenly becomes CZK 26 million – through no fault of your own. The same works in the opposite direction. It is volatility you cannot really control.

With longer-term loans, this is a non-negligible risk. We will advise you on how to minimise it. Write to office@arws.cz.

3. What should I do if I have a mortgage that is about to be refinanced and the new rate is very high?
You have several options. First: compare offers from other banks and, if appropriate, transfer (refinance) the mortgage to a cheaper bank – this is most often the quickest solution.

Second: try to negotiate better terms with the original bank. Third: in exceptional cases, you can consult an attorney to assess whether the contractual terms are unreasonable or unlawful.

The attorneys at ARROWS, a Prague-based law firm, can handle all three approaches and can tell you which route is best for you. Contact office@arws.cz.

4. Why don’t Czech banks focus more on supporting small businesses through lower rates?
Banks are businesses. Their profit depends on the margin – i.e., the difference between what they themselves pay to borrow money from the Czech National Bank or abroad, and what they then offer to you.

When interbank market rates are high and competition is not intense, they have no reason to reduce their margins. Small businesses are also riskier – statistically, more of them default than large corporations.

This leads to higher rates. In the long term, this is a problem for the economy. The state partly tries to address this through support (guaranteed loans, subsidies), but it will not solve it completely.

If your company is facing an investment and the issue is the availability of financing, we can also advise you on alternative routes – leasing, internal resources, or state support schemes. Write to office@arws.cz.

5. Is it safer to choose a fixed rate rather than a floating rate?
Safer in the sense that you know where you stand – your instalments will not change. But a fixed rate is usually higher than the initial floating rate.

If you expect rates to fall (as now), a floating rate should bring you savings. If you expect them to rise, a fixed rate protects you. It depends on your risk tolerance and the loan term.

For long-term investments, a combination often makes sense – part of the loan fixed, part at a floating rate. We will help you analyse scenarios. Contact ARROWS at office@arws.cz.

6. How should a business proceed if a bank refuses to refinance a loan at a reasonable rate?
You have the right to transfer the loan to another bank (provided the original agreement does not contain unrealistic penalties for early repayment). You can also ask the bank for reasons – why it does not want to offer you a competitive rate.

In some cases, it may be discrimination or an incorrect assessment of your creditworthiness. The attorneys at ARROWS, a Prague-based law firm, can lead negotiations with the bank and, if necessary, file a complaint with the regulator. You should not allow yourself to be intimidated. Contact office@arws.cz.

Notice: The information contained in this article is of a general informational nature only and is intended for basic orientation in the matter based on the legal status as of 2026. Although we take the utmost care to ensure accuracy, legal regulations and their interpretation evolve over time. We are ARROWS advokátní kancelář, an entity registered with the Czech Bar Association (our supervisory authority), and for maximum client safety we are insured for professional liability with a limit of CZK 400,000,000. To verify the current wording of regulations and their application to your specific situation, it is necessary to contact ARROWS advokátní kancelář directly (office@arws.cz). We accept no liability for any damages arising from the independent use of information from this article without prior individual legal consultation.

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