Press Conferences

4. 10. 2008 8:51

Press Conference after the Extraordinary Meeting of the Government on insurance of small savers´ deposits, Held on 14th October 2008

Jana Bartošová, Government spokesperson: Good afternoon ladies and gentlemen, welcome to the short press briefing afters the extraordinary meeting of the government. The Prime Minister Mr. Mirek Topolánek and the Minister of Finance, Miroslav Kalousek is here together with me. I ask the Prime Minister for his introductory speech.

Mirek Topolánek, Prime Minister of the Czech Republic: Before I give the floor to the Minister of Finance Miroslav Kalousek, I would like to say a few words. We are in fact one of first government which responds to the issue of insurance of ban deposits and guarantees for mall savers; I would like to say that the vote of members of the government was unanimous. We regard this step as necessary at the moment. I should say that information that appeared in our press concerning solved problem in Germany, was not true. According to our information it was done only in the form of proclamation but no concrete step has been taken. We took this step mainly because we wanted to contribute to the absolute trust of savers in our bank system.
Jana Bartošová, Government spokesperson: I thank the Prime Minister and now I ask the Minister of Finance for his introductory speech.

Miroslav Kalousek, Minister of Finance: Thank you. Just briefly – the government approved the amendment of the Act on Banks which I announced last week. The amendment increases the existing insurance from 25000 euro (maximum insurance amounted to 90%) to the amount of 50000 euro without any contribution. If we take technical data into consideration, in compliance with the existing legal state insurance of deposits is 90%, maximum is 25000 euro. It means that nowadays about 70%-75% of all deposits up to 90% are insured. After the amendment 97% of all deposits up to 100% will be insured. It means that 97% of retail clients need not have any fears concerning their deposits as they will have their deposits insured up to 100% without that 10% contribution. After Ireland we are the second country which approves a legislative amendment. Ireland approved something I could not agree with and something I would never agree with. All the other countries made just political declarations and they were behind us as far as concrete legislative measures are concerned. We are submitting the bill to the Chamber of Deputies and we propose shortening debate pursuant to section 90, and therefore the Chamber of Deputies could approve the Act during the first reading.

Jana Bartošová, Government spokesperson: I thank the Minister of Finance, and now I ask you for questions concerning this topic.

Tomáš Drahoňovský, TV Prima: I would like to know your response to the yesterday's event in Hungary. Hungary, as the first central-European country asked the International Monetary Fund for help in this respect. Do you think it could destabilize our central-European space somehow and that it could affect us?

Miroslav Kalousek, Minister of Finance: The situation of Czech banks is really different from that in Hungary, especially from that band which requires help of the International Monetary Fund. I repeat again that balances of Czech banks are clean; the system is stable and neither crises of liquidity nor insolvency threaten.

Czech TV: I would like to know whether the government expect to increase guarantees of the supplementary pension insurance and life assurance, as the insurance of deposits does not comprise these areas.

Miroslav Kalousek, Minister of Finance: Certainly not.

Mirek Topolánek, Prime Minister of the Czech Republic: Perhaps you should have mentioned the main reason. The Act on Supplementary Pension Insurance is strict and allocations of those deposits are so strict that "toxic" assets threaten neither in a short-term nor the long-term time horizon.

Miroslav Kalousek, Minister of Finance: Excuse me; I did not want to give a lecture. First, money is deposited for a long time and second, their accumulation during the time is such huge that no government can guarantee deposits in pension funds. It concerns quite different size of deposits. It means that deposits of clients of pension funds are guaranteed through absolutely strict and multiple regulations, with lots of provisions which force pension funds to invest with maximum caution. It is not possible to guarantee those deposits by public means; nevertheless in case of bank deposits it is possible.

Reuters: I would like to know what proposals you would support on the European level as there are for example proposals for establishment of a European rating agency, and so on.

Mirek Topolánek, Prime Minister of the Czech Republic: During the pushing through the mandate of the European Council, my stands will be strictly based on the conclusions of ECOFIN, and Miroslav Kalousek may describe them in a more detailed manner. My greatest reservations will concern the selective procedure of certain national states, and the lack of unity. I will unambiguously require the European Commission to assure us that in case of those measures which are being prepared it does not concern the public support that it is not breach of the law. If it would be a breach of the law, I would require unambiguous declaration in the conclusions.

Miroslav Kalousek, Minister of Finance: If I may add something, we certainly support closer cooperation, greater cross-border information exchange, and more cooperation in this field. What we cannot support is the abolition of principles which have been building in the European Union for years. They were principles of the Stability and Growth Pact and principles of fair competition which had been building for years, as well as principles of deposit insurance. Nowadays we regard those principles as if they were not valid, as if the principle "rob a neighbour as early as possible, otherwise he will be faster" was a prevailing principle. We do not think that in the European space, which should be solidaristic, it is necessary to hear statements on political courage to take an extraordinary measure. We are convinced that much more political courage rewires to insist on principles which we regard as correct not only in good times but also in bad times. These principles have been building for all cases and all days; in particular in worse days these principles should be observed. It means that we cannot support abolition of principles which are essential for fair competition and stable environment..

Jana Bartošová, Government spokesperson: Is there any other question, please?

Leoš Rousek: I have a question to Mr. Minister Kalousek concerning insurance. Does this insurance apply also to company's deposits?

Miroslav Kalousek, Minister of Finance: Both physical persons and legal entities are insured in the Czech Republic and this principle is maintained.

Leoš Rousek: So, those 97% of all accounts concern accounts of legal entities as well.

Miroslav Kalousek, Minister of Finance: It concerns 97% of all retail deposits. I was speaking on retail deposits.

Leoš Rousek: And further question concerns the amendment on banks. How will the government be influenced regarding the term of euro adoption?

Miroslav Kalousek, Minister of Finance: This amendment did not influence it at all. Nevertheless, the situation in Europe will significantly influence the consideration of the government on adoption of euro; there are not doubts about it. The government will deal with the material on the euro adoption strategy of the Czech Republic adoption and there will be a separate press conference on this issue. It will not be an extraordinary material. That material is regularly debated in autumn.

Mirek Topolánek, Prime Minister of the Czech Republic: If the individual governments declare to do their best to avert bankruptcy of their financial institutions, they implicitly say that it is at the expense of rules of the Stability and Growth Pact which are applied in Eurozone.

Jana Bartošová, Government spokesperson: Thank you, the Z1 TV.

Z1 TV: I would like to ask whether you will pre-negotiate the support of that proposal or that amendment with deputies around Vlastimil Tlustý and with the opposition.

Mirek Topolánek, Prime Minister of the Czech Republic: I cannot imagine a political subject which would sacrifice speed which is necessary for implementation of this measure at the expanse of its own political targets. If somebody takes such a responsibility I will not envy him, I should say.

Jana Bartošová, Government spokesperson: Thank you and the last question – Czech TV please.

Czech TV: I have one more question concerning funds, this time shares funds. They are losing billions monthly just because of the crisis; and how about the insurance of them? And what are rules for their investments like, what is the strictness like about which you were talking?

Miroslav Kalousek, Minister of Finance: It is a free will of every citizen if he wants to invest his means and to have them insured or to invest them and to have a chance to gain higher annual returns with higher risk. That is a common principle of the life. Higher annual returns are conditioned by higher risks. Higher insurance means lower annual returns. It does not concern only money.

Mirek Topolánek, Prime Minister of the Czech Republic: Basic rules of the textbook of capitalism state that in the situation when some people sell, the other people buy. In this respect the patience of investors of share funds is the only one thing I can recommend to them.

Jana Bartošová, Government spokesperson: Thank you for your attention. Good-bye.

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