Building and savings banks first appeared in Germany. The first building and savings society was founded in 1885 in Bielefeld and received the pathetic name “Building and savings society for everyone”. It was founded by Pastor von Bodeschwingh. The boom of building and savings societies in Germany occurred in the period 1924-1929, when the country, weakened by the First World War, needed to attract finances for the restoration and construction of new houses.

After the currency reform of 1948, the country entered a period of “economic miracle”, which led to a very dynamic development of the building and savings societies (BSS) system. In those years, Germany needed at least 5-6 million apartments. In 1948, the number of BSS clients slightly exceeded 300,000, and 23 years later their number exceeded 12 million.

In 1973, the Building and Savings Societies Act came into force in the country, regulating all their activities. In the 1980s, the building and savings society system functioned extremely sluggishly. This can be explained by the generally favorable economic situation and, as a result, the growth of the population's income. The building and savings society system in Germany gained a second wind in the 1990s.

The positive experience of German SSCs has spread to other countries, such as Austria and France. Today, every third German and French person purchases housing through the SSC system. And in the early 1990s, the SSC system began to actively develop in the countries of the former socialist camp – the Czech Republic, Slovakia and Hungary. The first results are impressive: in the Czech Republic, a quarter of the population purchases housing through SSCs, and in Slovakia – a fifth. Currently, the SSC system is also beginning to advance in Croatia. An act regulating the activities of SSCs was also recently adopted in Romania. The Chinese government has also become interested in the construction savings system.

Savings as an idea

According to Valery Kalinin, head of the mortgage lending department at Petrocommerce Bank, the main advantage of the housing savings system is that it is a self-financing closed system. “The housing savings system synchronizes capital accumulation and financing within certain limits,” Kalinin explains, “and thanks to refinancing at the expense of own funds (accumulation of construction savings), it is fundamentally independent of the external financial market. It turns out that within a large financial market with a constantly changing market situation and variable interest rates on deposits, a small closed market “for our own” with strictly fixed rates arises. At the same time, the number of “our own” can be any.”

How does the SSC mechanism work in the Czech Republic and what can Russians learn from this experience? Like in Germany, savings banks in the Czech Republic were created with the aim of allowing as many people as possible to solve their housing problem through savings and loans provided on favorable terms. Over the 10 years of their existence, Czech SSCs have established themselves as one of the most promising banking products.

The activities of SSCs in the Czech Republic are regulated by the Act on Building and Savings Societies and Act No. 96/1993 Coll. on building savings and their state support. A significant role in the development of SSCs in the Czech Republic was played by the Association of Czech Building Savings Banks (ACBSB), which was founded in 1997 and currently includes six large banks.

A natural person permanently residing in the Czech Republic and holding the relevant identity card, or a legal entity registered in accordance with the law, may become a participant in the SSC. The condition for receiving state support (if the participant does not require a loan) is a minimum of five years of non-disposal of the saved funds. If the participant intends to use the loan, the minimum period of non-disposal of funds is two years.

The activities of the SSC are based on the principle of client participation in the creation of pooled resources (savings). Within the SSC, amounts are accumulated that can subsequently be provided as loans to improve housing conditions at favorable interest rates (up to 4% per annum on average). These amounts can be used to purchase or reconstruct a house or apartment, as well as to resolve other housing issues of clients. Any shareholder who saves funds over a long period (two years according to the law) and fulfills the basic terms of the agreement can claim a “reward” in the form of a construction and savings loan. World practice is such that in order to stimulate clients, those who have successfully completed the mandatory accumulation stage are entitled to “bonuses” from the state. The amount of the “bonuses” can vary depending on the accumulation period, the accumulated amount, and even the composition of the family.

In cases where building and savings banks have significant financial potential, they can provide the client with a so-called “covering loan”, the purpose of which is to finance the client for housing needs until he or she becomes eligible for a building and savings loan. It should be noted that the above-mentioned type of loans is becoming increasingly popular with both financial institutions and clients.

Savings as a way of life

A significant role in the SSC system is played by the category of clients who contribute shares not for the purpose of solving the housing issue, but for the purpose of preserving and increasing funds. State support provided to all clients is reflected in the SSC system for two reasons. Firstly, it provides a source of financing for those clients who are focused on solving the housing issue. However, the main reason for providing state support is to increase motivation for saving. Both for clients who are simply saving funds and for those who are saving for the purpose of purchasing a house, this form provides an additional bonus.

At the first (accumulative) stage, deposits from individuals are attracted at a low interest rate. Ideally, upon expiration of the contract, the savings account should contain

an amount equal to 40-50% of the apartment's value. Those who successfully complete the accumulation stage are guaranteed to receive a loan for the remaining amount.

The accumulated funds can be used not only for purchasing housing, but also for repairs, reconstruction or modernization of an existing one.

According to the secretary of the ÁÇSSB, Jan Patek, one of the most important advantages of construction savings is their high level of protection. “Only specialized banks with special licenses can accumulate construction savings,” says Patek. “The law regulates high-risk operations of construction savings banks, so construction savings can be considered one of the most risk-free financial instruments.”

What do savings give?

Construction savings allow to satisfy individual housing needs and increase the number of citizens interested in reconstruction or renovation of their housing. All this, of course, has a favorable effect on the development of the construction industry. Part of the funds invested in construction savings returns to the federal budget in the form of increasing tax payments of construction companies and their partners engaged in the production of building materials and other related industries. At the same time, the growth of construction and sales volumes, as well as increasing incomes of the population allow to increase the volume of consumption (in this case, real estate) and, as a result, to strengthen the state budget.

According to Kalinin, “the advantage of the functioning of the SSC is that with a low interest rate in the accumulation mode, shareholders receive a unique opportunity to receive a guaranteed loan to improve their housing conditions, and also at a rate significantly lower than the market rate. And state bonuses allow for the compensation of inflation and the practically inevitable rise in prices on the housing market.”

In 2003, the need to finance housing construction in the Czech Republic with construction savings increased. This trend is likely to continue in the next few years. In 2003, 156,289 savings and “bridge” loans were issued in the Czech Republic for a total of CZK 33 billion (RUB 37.3 billion). Almost 19% of these loans were intended for the purchase or construction of new homes. The volume of financing directed toward solving housing problems has increased by almost 50% compared to 2002.

As of December 31, 2003, the total volume of loans managed by the banks of the ACSSB in the amount of over 685,000 units accumulated funds in the amount of CZK 63.6 billion (RUB 71.9 billion).

Research into the structure of loans provided by construction and savings banks shows that more than a third of the participants of the construction and savings banks (36%) want to spend the savings on the reconstruction and modernization of their real estate properties. Statistics show that the general condition of the housing stock in the Czech Republic can hardly be called satisfactory, so considerable investments are required for its restoration. This largely concerns the numerous panel houses from the era of developed socialism, whose service life is already coming to an end. Thus, construction savings will also help solve this problem, which is relevant for the country.

The Rise of the Savings Era

Currently, Czech construction and savings banks are investing in the construction of over 20 major projects. In 2002, Czech construction societies issued a total of 131,000 loans, 16% of which were used to purchase or build apartments and residential buildings. Thus, construction societies participated in the construction of 21,000 apartments. In total, 33,606 apartments were built in the Czech Republic in 2002. This means that construction societies participated in the construction of 60% of apartments. This once again proves that construction savings are a very popular form of financing housing construction in the Czech Republic.

Compared to its main competitors in the housing finance market, construction savings banks win in many respects. Thus, in 2003, construction savings banks provided 156,289 loans, while the number of mortgage loans issued in the same year was only 31,000. However, the volume of mortgage funds was CZK 36 billion, while the volume of construction savings loans was only CZK 33 billion. This means that the SSC institution has good prospects for expansion.

The year 2003 was marked by changes in the legislative acts regulating the activities of the construction and savings system. The impetus for this was the alignment of the country's legislation with European legislation in connection with the Czech Republic's accession to the EU. In general, the changes affected the reduction of expenses from the state budget and the preservation of the functioning of construction and savings systems. The amendments came into force on January 1, 2004.

In particular, the innovations affected the amount of state support. Not only its percentage, but also the basis for calculating state support have been changed. The amount of state support is 15% of the amount accumulated in the current year. The maximum amount of the basis for calculating state support has been increased from 18,000 to 20,000 Czech crowns (RUB 20,300–22,600). Thus, as of today, the maximum amount of state support received annually is 3,000 Czech crowns (RUB 3,400). For persons who have concluded several contracts with SSC, state support will be provided only under the first of the concluded contracts.

Other legislative changes affected the minimum accumulation period. It is increased from five to six years. This period is necessary to receive state support (provided that the client does not manage the funds in the savings account and has not used his/her right to receive a loan from the construction and savings bank).

Legislative changes also allow for the joint use of savings among relatives to build or purchase a home. For example, parents will be able to finance the purchase of a home for their children by receiving a targeted loan from a construction and savings bank.

Savings Prospects

One of the latest innovations affecting the functioning of credit unions in the Czech Republic is the legislatively regulated increase in the authorized capital to 1 million euros. Igor Kuznetsov, President of the international company Capital Markets & Financial Experts Group (CaMFEx), operating in Prague, believes that such an innovation will contribute to a decrease in the activity of credit unions. “Credit unions will experience difficulties,” says Kuznetsov, “and the weakest ones, including regional ones, will close down altogether.” However, according to Kuznetsov, the situation in the construction and savings banks market, on the contrary, will improve. “Today they already have a solid client base, acquired not least thanks to large-scale mortgage programs. And in the near future, their activity will only grow,” he believes.

The positive experience of the Czech Republic is very useful, but it should be taken into account that the population of this country is comparable to the population of Moscow. It is obvious that Russia will need a more global solution to the housing issue.

Certain steps have already been taken towards developing the SSC system in Russia. Two years ago, a group of State Duma deputies prepared a draft federal law “On Construction Savings Banks” for consideration. The idea of the law was also supported by the Banking Supervision Committee of the Central Bank of the Russian Federation, stipulating that SSCs should be banking organizations with a limited set of functions and become directly supervised by the Central Bank or the Federal Service for Financial Markets.

However, the Ministry of Finance's opinion on the draft law was negative. The reason for the cool attitude towards it was that the government was not prepared to bear the annual costs of stimulating the participants of the SSC system.

Interest in the law is currently being renewed. “The law should provide for the creation of a new segment in the financial market – specialized banks,” Kalinin believes. “The mode of contributions, monthly deposits into a savings account, should become completely unburdensome for the depositor. Moreover, he should be guaranteed the safety of savings and state support for participation. The low interest rate on the deposit (up to 3% per annum) during the accumulation period is compensated by the fact of “earning the right” to receive a loan, which will be provided on favorable terms, at a rate significantly lower than the market rate.”

Deputy Head of the State Unitary Enterprise UEZ Valentin Pavlov believes that the SSC institute itself is extremely relevant for the transitional period of the economy, since it can offer the cheapest loans. “Today, our country lacks guaranteed savings systems, so this product is certainly necessary,” he says.

Indeed, on the basis of the SSC Institute, the city will be able to expand investment sources for housing construction by attracting funds from the population itself, speed up the solution of housing problems for those on the waiting list, partially provide funding for the reconstruction program for five-story housing stock and the implementation of large city projects for the integrated development of industrial zones being liquidated. The pilot construction and savings bank in the South-West District of Moscow has been operating for five years already, and according to the decree of the capital's government, its experience should be extended to the entire city. It was not possible to obtain comments from the general director of JSC "SSC" Alla Lebedinskaya.

“I think that construction savings banks are an extremely important institution,” says Ivan Grachev, president of the International Academy of Real Estate Mortgage. “The positive experience of poor Eastern European countries – the Czech Republic, Slovakia, Hungary – shows that construction savings banks will also take root in Russia, where the population also cannot boast of sufficient income to purchase housing.”

Grachev believes that it will take a maximum of one and a half years to adopt the law and fine-tune the mechanism for the functioning of the SSC. “The law is ready,” he states. “And it will be adopted if there is political will.”

According to Grachev, the adoption of the law is opposed by two hostile forces. The first are supporters of the American two-stage mortgage model, who do not recognize any other forms of housing lending. The second are quasi-construction savings banks - institutions that attract funds from the population and build financial pyramids.

However, not only SSKs will be effective today, but also other accumulative financial and credit products that have proven their reliability and stability. “Today, all systems that allow citizens to buy an apartment in installments are relevant,” says Irina Shugurova, chairwoman of the Housing Cooperative “Apartments.” “This expands opportunities for those Russians who cannot boast of a high income. Any accumulative systems are especially useful because, for a number of reasons, not everyone can apply for a mortgage loan.”

ON THE CONTINENTS: The Habit of Saving