EFTA Document EFTA01379402

22 December 2017 EM Currency Handbook 2018: Still Fuel in the Tank Czech Republic The Czech koruna (crown) replaced the Czechoslovak koruna at par on 8th February 1993. The koruna has been free floating since Jan 1997, when the managed float regime was abolished. Prior to January 1997, the koruna was managed against a basket of USD and DEM with intervention bands of 44-7.5% around central parity. The foreign exchange regime was fully liberalized in 1999. The koruna is fully deliverable and convertible. Spot is liquid in both USD/CZK and EUR/CZK but EUR/CZK is the dominant cross with around 85% of transaction volume. EUR/CZK has also taken-over from USD/CZK as the most important cross in the FX forward and options market. Czech Republic joined the EU in 2004 and therefore has a commitment to join the Euro at an unspecified future date. In order to enter the Eurozone, it must first meet all Maastricht criteria. The primary objective of the Ceska Narodni Banka (CNB) is to maintain price stability, as defined by a target of 2% +/-1%. Policy decisions are made by the seven-member Board which meets eight times per year. On 7 November 2013 the CNB Bank Board adopted a one-sided exchange rate commitment set at CZK 27 to the euro. The commitment lasted until 6 Apr 2017 when the Board decided to end the commitment at an extraordinary monetary policy meeting. The discontinuation of the exchange rate commitment means that the koruna exchange rate now moves according to supply and demand on the foreign exchange market. Page 56 USD/CZK and EUR/CZK exchange rates 300 350 JO 0 ZS 0 200 ISO 100 SO • 25 0 100 ISO 100 SO 0 00 4 4r 4 40 4 4 4" 4" 4" 4" 4, " 40' 41 11/4/01% to moo-IAD/CD( ant Moto Data** Sint illoomOmy Pion IP USDIC7K and imphed yields 00 .05 -30 3s -20 -25 -30 -35 -10 1 1 1 11 11 11 11 / e 11 p 11ecd mo use/Ca 1m Implied yekl.11o —41501C24 .rhs San ()Abdo Berk 28 0 27 0 26 U 25 :4 230 120 210 200 EUR/CZK implied and historical volatility 120 100 20 6.0 4,0 2.0 0.0 30 J0 4.0 .0.0 2010 2011 2012 2013 2011 2015 2016 2017 mmolood 3m vol len vol Soave Dane?. fla* abentep firs:ea , Deutsche Bank Securities Inc. CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0076859 CONFIDENTIAL SDNY_GM_00223043 EFTA01379402