COOPERATIVE SAVINGS ASSOCIATIONS IN CZECH HISTORY AND THEIR POSITION IN THE MODERN CZECH FINANCIAL SECTOR

Abstract

The article first describes the history and legal regulation of cooperative savings associations in Czech lands since the second half of the 19th century. The initial regulatory issues were resolved by the Cooperatives Act No. 70/1873 ř.z. [Imperial Code], complemented by Act No. 133/1903 ř.z. [Imperial Code]. Historically there were two types of cooperative savings associations: (a) the Schulze-Delitzsch type and (b) the Raiffeisen type, or “Kampelička” [savings and loan association]. Cooperative savings associations expanded throughout central Europe, and in Czechoslovakia they existed also between the world wars. The communist regime after 1948 cancelled the cooperative savings associations and transferred their assets to a single state-owned financial institution. In the middle of the 1990s the efforts to restore the sector of cooperative savings associations culminated in the enactment of Act No. 87/1995 Sb. [Collection of Laws]. Lack of continuity of ownership relations, poor legal regulation and insufficient supervision resulted in the cooperative savings associations not being a positive complement to the sector of financial services similarly to Austria and Germany; on the contrary they represent a risk to the development of the Czech financial sector. In 1999 there were 127 cooperative savings associations, and later there was the first wave of insolvencies. In 2004 the rules for operation of cooperative savings associations became much stricter, and since 2006 they are under supervision of the Czech National Bank. Currently there are 12 cooperative savings associations active in the Czech Republic and they cover less than one per cent of the entire banking sector, however in case of possible financial difficulties they may jeopardise the trustworthiness of the entire financial sector and draw from the Deposit Insurance Fund.