Financial markets face increased supervision under a plan proposed by the Finance Ministry and the Czech National Bank.

The watchful eye of the Czech National Bank (CNB) may soon penetrate the country's vast financial markets if the government approves a proposal to give it expanded oversight power.

"Integration of [financial] supervisory bodies is required if the government is expected to have control over the fast-developing financial markets," said Finance Minister Bohuslav Sobotka July 19.

If the proposal is adopted, Sobotka said, the CNB will not only regulate the banking market but also capital markets, financial funds, insurance companies and credit unions. The plan to integrate current financial supervisors within the CNB was jointly drafted by the Finance Ministry and the CNB. The draft is awaiting approval of the Cabinet before being passed to the Parliament and President Václav Klaus. Since the opposition came out in support of the preliminary draft, it's likely the measure will be signed into law early next year.

Sobotka said the proposal was launched in part as a response to critics who have assailed the government in recent years for its lack of oversight of financial markets. During the 1990s several fraudulent managers stripped their banks, investment funds and credit unions of assets, and state authorities were none the wiser until it was too late. The government was forced to pick up the tab for these failed financial institutions and ended up paying out hundreds of billions of crowns to their clients to cover deposits. That turbulent period saw the consolidation of some institutions and the demise of a host of others and generally served to clean up the market.