Press Release of Czech Building and Loan Societies AssociationConcerning debates on amendment to Act on Saving with Building Societies in PSP ČR

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The Czech Building and Loan Societies Association (AČSS) has been carefully monitoring debates on amendment to Act on Saving with Building Societies in the Lower House of the Parliament of the Czech Republic (PSP ČR). AČSS understands the efforts of the government to save finance from the state budget, however, it considers necessary to point out negative aspects of the amendment to the mentioned act. The system of saving with building societies has proved itself very well and its reform is unnecessary in respect of its functioning. Saving with building societies has been more often used with financing construction of new apartments and houses, purchases of older apartments, and to a significant extent – also with reconstructions and improvements of the housing fund. This fact is proven by the growth in the volume of provided loans in the first half of 2003, jumping about 50% compared to the same period of the last year. This trend will continue also in the future.

To allow saving with building societies remain an effective tool of housing financing, AČSS proposes to adjust some parameters of the government's draft:

• The government's pro­posal to reduce the state support to 12% – but to not more than CZK 2,400 per year – is based on the assumption that the long-term reduction in interest rates has created a space for reduction in the state support rate. Those values are lower than the Ministry of Finance calculated with when preparing the concept of the public finance reform. AČSS considers the originally proposed reduction to 15% a limit value. Any potential drop below the limit of 15% could represent a threat to the stability of the system in the long-term outlook. AČSS has proposed a lower reduction in the state support and still supports this proposal.
• Further, AČSS disagrees with the age limit of 15 years for joining the system of the state support. This measure discriminates and – in its results – limits the possibility of parents to start saving for their children's housing in time.
• AČSS also believes that it would be meaningful to make financing options and access of clients to loans generally easier. As an example, we can mention a case, in which parents wish to secure housing for their children. The present wording of the law requires that a loan serves to solve housing needs of the respective participant, and it is not possible to use saving with a building society to solve housing needs of any member of the participant's fa­mily. Therefore, AČSS proposes not to link financing to housing needs of a specific participant, allowing a smooth merger of several contracts concluded within a single family when drawing a loan. This measure would not bring about any additional requirements for the state support; it would only allow using accumulated finance purposefully through loans to improve the housing conditions of participants.
• We consider the introduction of various level of state support for various groups of participants a non-systematic measure, and we are afraid that the system could become destabilized as in the similar care several years ago in Slovakia. Moreover, such measure would increase inadequately technical and administrative demands on the Ministry of Finance, each respective building and loan society, and – last but not lease – the clients.

AČSS will continue formulating objections with the aim to secure functionality of the system of saving with building societies also in the coming years. We believe that our objections will be considered during further debates on the act in the Parliament, and that introduction of necessary saving in public finance will not threaten a well-functioning system of saving with building societies, representing a stable and sound corner stone of the Czech financial sector.

Contact: Ing. Jan Pátek, AČSS Secretary, Mobile: 603 329 820, e-mail: tajemnik@acss.cz

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