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

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At the beginning of April, the Czech Building and Loan Societies Association (AČSS) received a draft amendment to Act on Saving with Building Societies, and has thoroughly studied it. AČSS understands the efforts of the Ministry of Finance to save finance in the state budget. However, it considers necessary to point out also the negative aspects of the measure. 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 trend will continue also in the future.

Every intervention into a well-functioning system introduces a risk of damage. 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 proposal of the Ministry of Finance to reduce the state support to 15% – but to not more than CZK 3,000 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. AČSS considers such reduction too high. The change also fails to respect the fact that the maximum amount of the state support (CZK 4,500 at present) has not been valorized since 1993, and considering the growth in prices, its real value is at about one half nowadays. Therefore, AČSS proposes that the state support is changed to 18 %, but not more than CZK 4,500 per year. The state support could be then acquired from deposits of up to CZK 25,000 per year.
• Further, AČSS disagrees with the age limit of 15 years for joining the system of the state support. This measure is discriminating, and – in its results – reduces the motivation of the young generation to take care of their housing from early age, and 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 easier. We often encounter situations, 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 other persons. Therefore, AČSS proposes not to link financing to housing needs of a specific participant, thus allowing – for example – 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.

In addition to the above-mentioned principal objections, AČSS has raised also some other objections within the framework of the comment procedure. Those objections were formulated with the aim to secure functionality of the system of saving with building societies also in the coming years. Analyses carried out indicate that modifications proposed by AČSS would not threaten the saving of the state support, which is the aim of the Ministry of Finance. We believe that our objections will be taken into consideration upon the debate about the act and that necessary saving within 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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