The lower house of Parliament has approved the issue of state bonds worth 6 billion CZK to be paid to members of bankrupt credit unions as compensation for lost savings. This came after heated debates in the lower house, as well as demonstrations outside government headquarters. At the same time, many of the bankruptcies are being investigated by the police. Vladimir Tax reports:
Cooperative banking in the form of credit unions had a long tradition in the Czech Lands, but it came to an end after the communist takeover in 1948. Efforts to re-establish credit unions in the Czech Republic in the mid-1990's were therefore welcomed as an alternative to the unstable banking sector. A special law introducing state supervision for the unions seemed to be a sound guarantee.
Unfortunately, it turned out that idea of mutuality had significant drawbacks. Many Czechs, who were used to deposit their savings in banks, did not realize that they were actually becoming members, not clients, of the credit unions, and shared responsibility for running the cooperatives.
When the first credit unions started going bankrupt, it turned out that some leading representatives had also worked for Czech banks that had collapsed under dubious circumstances. Analysts put the problem down to wide-scale asset-stripping.
The state supervisory office reacted by introducing forced administration upon the collapsing credit unions, but proved powerless to protect ordinary members, many of whom lost all their savings. The police have begun investigating the suspicious practices of some credit union representatives and fresh charges are being filed every week.
Paradoxically, it was this crisis that has made credit union members work together to accomplish a common goal: to get their money back from the state, whose supervision failed and is therefore jointly responsible for the situation. The government proposed issuing state bonds worth six billion CZK to compensate for the lost savings, but Parliament rejected it twice. Meanwhile, credit union members stepped up their protest campaign to get their money back and the lower house finally approved the issue of bonds on Thursday.
Some analysts say Czech taxpayers will once again have to pay for the irresponsible behaviour of others, who, lured by the vision of high interest rates, made uninformed decisions about their savings.
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