Interest in building savings is declining, and the volume of loans is also lower

Prague - Building savings banks provided loans totaling more than 29 billion crowns from January to the end of August this year, which is a year-on-year decrease of 27 percent. There is a persistent decline in interest in new building savings contracts, including increases in target amounts. This is clear from the data of all five domestic building savings banks.
    By the end of August, the savings banks had closed about 469,000 new contracts, while last year in the same period there were over 531,000 contracts. The number of newly closed contracts only increased year-on-year for the Czech-Moravian Building Savings Bank, while it decreased for the others.
        However, all savings banks experienced a decline in target amount for new contracts. Overall, this amount stood at just under 132 billion crowns at the end of August, compared to over 170 billion crowns last year. The target amount expresses the future intentions of the customer, i.e., how much they intend to save or borrow for housing. Its amount cannot be exceeded, but it can be increased.
    In the case of loans, only Modrá pyramida recorded a slight year-on-year increase. Other savings banks lent less money compared to the previous year. The largest drop in the volume of new loans was recorded by Wüstenrot Savings Bank.
    Building savings banks provide loans from their own sources - from the deposits of those clients who save. On the other hand, mortgage banks mostly borrow for the loans they subsequently provide to clients, and interest rates depend on the length of the fixation period and the cost of money on the interbank market.
    At the beginning of September, the Chamber of Deputies approved the government's proposal to limit state support for building savings in its final reading with the votes of the coalition. Support will decrease to a maximum of 2,000 crowns per year for both new and existing contracts, and interest on deposits will be taxed. The state aims to save four to six billion crowns.
    The Ministry of Finance is also preparing further changes. It proposes that from 2013 state support for building savings will only be available to those who use it for housing or take a loan from a building savings bank. Additionally, from 2015, the Ministry of Finance wants to allow universal banks to provide building savings. In the case of building savings provided by a universal bank, the bank will not be limited in the use of the funds according to the proposal. Banks will be able to handle them just like other primary deposits.
    According to the Executive Director of the European Association of Building Savings Banks, Andreas Zehnder, the proposed changes will effectively lead to the liquidation of the entire building savings system in the Czech Republic.

Volume of provided loans from January to August 2011:

savings bank	loans volume (in million CZK)	year-on-year change (in pct)	total contracts (in thousand)
ČMSS	14,853	-21%	2000
SSČS	2,764	-27%	1,096
Modrá pyramida	5,668	1.5%	732
Raiffeisen	4,472	-43%	784
Wüstenrot	1,685	-60%	440
TOTAL	29,442	-27%	5,052

Number of loans provided and newly closed contracts January - August 2011:

savings bank	New contracts 2011	Target amount 2011 (in million CZK)	New contracts 2010	Target amount 2010 (in million CZK)	Number of loans provided 2011	Number of loans provided 2010
ČMSS	219,135	72,325	185,736	84,414	30,953	37,266
SSČS	72,324	14,947	113,828	22,914	10,640	13,332
Modrá pyramida	60,960	16,825	96,344	20,323	8,061	9,304
Raiffeisen	79,221	17,678	85,233	25,761	8,767	13,185
Wüstenrot	37,551	9,984	50,369	16,673	3,849	5,933
TOTAL	469,191	131,759	531,510	170,085	62,270	79,020