Czech Government to Reduce Support for Building Savings Contracts and Restrict Bank Offerings

The Czech government has announced its decision to decrease support for building savings contracts by 50% starting in January 2022 and prohibit banks from offering them altogether.

Previously, the Ministry of Finance had proposed that banks could apply to provide building savings contracts, citing increased competition and improved cost-effectiveness as potential benefits. However, this proposal has been abandoned, and the possibility of all banks offering building savings contracts is not currently being considered.

Despite this, there will be changes to the law, specifically regarding energy-saving measures in homes and flats. Loans will still be available for these measures, including insulation, window replacement, and boiler replacement.

Building savings contracts have been known for offering favorable loans, which will still be provided in the future for energy-saving modernizations. Other modernization projects for homes will also remain eligible for loans.

Additionally, building savings associations were expected to participate in providing subsidies through the New Green Savings program, which aimed to support the purchase of photovoltaic panels or heat pumps. Applicants would be able to apply for a subsidy at the branch and utilize a loan for further financing. The details of this program are currently being clarified by the Ministry of Finance, the Ministry of the Environment, and the building savings associations.

The lending activity of building savings associations has seen a significant decline, with loans amounting to CZK 14.3 billion provided from the beginning of this year until the end of May, nearly 60% less than the previous year’s figures.

To reduce expenditures, the government plans to decrease state contributions to building savings from ten to five percent, with a yearly limit of CZK 1,000. Additionally, the explicit exemption of this support from income tax will be abolished. However, clients of building savings associations may not be subject to tax on state support if it falls below CZK 50,000 per tax period in combination with other income of the same type.

In the first five months of this year, savings associations concluded 205,376 building savings contracts, marking a seven percent decrease compared to the previous year. However, the target amount increased by 4.4% to CZK 118.7 billion. Currently, there are a total of 3.1 million building savings contracts held by savings associations in the country.

Article by Prague Forum

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