Ceska Sporitelna is not influenced by the situation on international financial markets
Do you at CS fear the present market situation? Can this affect
your bank, too?
We are not afraid for CS nor for any other bank on the market. This
country's market is sound and conservative and functions well, it is a market
with a strong capital basis. Ceska Sporitelna's policy of granting loans
to clients as well as for investing on capital markets has been and will be
conservative. Hence, CS cannot be exposed to the turbulences which have struck
certain American and European financial houses. Furthermore, one of the
consequences of this crisis may be that the business model employed by Czech
banks will prove as successful in the long-term.
Are my deposits safe?
Your deposits are absolutely safe at Ceska Sporitelna. Our bank has a long
tradition, its history reached back to 1825. Since then, we have
experienced a number of moments on financial markets which were problematic,
but we have always managed to protect our clients' fund. That is due to
the careful, almost conservative investment and loan policy of ours. In
the recent past, we were criticised for it, and today, it is becoming evident
how prudent it had been.
How can I tell that my bank is healthy?
First: We have a functioning business model, we focus on the Czech market and
we do not need to engage in large transactions on the international
Second: Our risk management policy is very conservative.
Third: Over the long term, we have reported sustainable and stable
Fourth: We have a strong liquid position.
Everyone says that it is all right, but I do not believe it. How
will you protect my money should something happen?
Sufficient liquidity, capital adequacy above the level required by the
regulator, a low loan-to-deposit ratio and a profit of over CZK 6.6 bn in the
first half of 2008 are clear evidence of our bank being
healthy. Furthermore, by law, bank deposits are insured, which is why
banks pay a portion of their income to the Deposit Insurance Fund every
What started the crisis in the US and can it happen here, too?
The crisis in the US was started last autumn due to the way in which certain
companies provided mortgages. Nearly anyone got a mortgage. People
massively borrowed for real estate and then were unable to pay their
instalments, which influenced the stability of the companies that loaned them
the money. In addition to that, certain banks had invested their money
into these mortgage companies and into the investment instruments issued by
them, and those banks did not get that money back. In the end, the wave of
instability caused that today, certain banks are in a situation when the state
or another bank needs to given them a financial injection in order for them to
survive. But no bank, with the exception of the investment bank Lehman
Brothers, has fallen. None of that directly concerns the Czech Republic, one of
the reasons being that certain large banks operating on the Czech market are
not primarily focused on investment banking, but rather, on serving retail and
I have money in funds and their value is dropping. What should I
The present instability in financial markets is manifest in the fluctuation of
the value of even conservative funds. The present market prices of many
assets do not reflect their fundamental value and once the situation calms
down, we can expect prices to stabilise. We recommend that investors
stick, in a disciplined fashion, to their investment horizon which they chose
when they acquired the investment concerned.
What method of depositing money is presently absolutely safe?
Safest are deposits, insured by law, in large banks serving retail
clients. Among investment instruments, the least fluctuation can be
expected from money market funds, whereas a greater level of fluctuation (but
also potential yield) is traditionally connected with investment into
How long will the present situation last?
It is very difficult to foresee the end of the crisis. The present trend
has been under way for about a year, and it will probably continue for another
few months, but then the situation will calm down and a revival will
come. In similar situations, the rule applies that the less panic is
caused by them, the better the economies can deal with them. Therefore, we
again repeat that there is nothing to fear, whether with CS or with Erste.
Will you tighten loan provision?
We have no reason to do that. Our loan policy has been very prudent in the
long-term, and we will not change it, whether with respect to companies or
Does it make sense to take a loan or a mortgage? Do I stand a
chance of getting them?
Nothing changes for our clients. We provide loans and mortgages in the
same manner as we have done to this point, and we will continue to administer
our clients' assets equally as prudently.
Can deposits be insured?
Yes, that is even stipulated by the Banking Act. For example money in
current accounts, savings accounts, and building society deposits are insured
up to EUR 25,000.
How is Erste's stock price doing?
All international stock exchanges are presently influenced by the nervousness
on the market, which is manifest in the form of price fluctuations. One
day, shares can drop by several percent, and the next day, they strengthen
again. The faster the situation calms down, the faster stock prices will
stabilise. The same applied for Erste Bank, whose present stock price does
not reflect its actual value, but is “riding along” with the world-wide stock
What is the link between the price of stock and the health of a
Stock markets reflect the expectations of future developments. When market
actors are nervous, it becomes manifest in greater fluctuation in stock
prices. But changes in stock prices need not necessarily have an impact on
the health of a company. The health of a bank depends on its business
model. Ours is focused primarily on the domestic market and is only
influenced by external influences minimally, or nearly not at all.
Why has nobody informed me about the situation?
The situation on the market changes from one day to another, as new news
appears. In recent days, we have seen great price fluctuation, which will
continue for some time. Nobody can say when the situation will calm down.
So how is it with deposit insurance? I'd be better off putting
my money in a safety deposit box.
Ceska Sporitelna and the entire Czech Banking sector are relatively isolated
from the crisis, because banks’ policies here have always been very
conservative. Banks do not hold expositions in the US. They do not
have liquidity problems. Nothing changes for clients.
In the entirely hypothetic situation, according to Sec. 41e (2) of Act No.
21/1992 Coll., on Banks, stipulates that compensation from insurance of
receivables from deposits shall be provided in the amount of 90% of the sum of
the insured deposits with a bank, but to a maximum of the equivalent of EUR
25,000. As for safety deposit boxes, deposit insurance only applies to
receivables from deposits, not to cash. The bank does not know the
contents of a safety deposit box; that is only known to the box holder.
In our opinion, the fact that a bank is put under receivership or goes into
liquidation, i.e., a receiver or a liquidator act as the statutory body (person
authorised to act on behalf of the bank), has no impact on the fact that the
holder of a safety deposit box can collect its contents, or terminate his
contractual relationship with the bank.
How can you offer an American mortgage at a time like
What we refer to as “American mortgages” are absolutely safe products.
Officially, it is a general-purpose consumer loan secured with real property,
which has nothing in common with the situation on international financial
markets. It is referred to as American mortgage due to historical consequences.
In the past, mortgages had been strictly single-purpose. Later, the practice of
providing mortgages even without stating a reason, backed up by real estate,
developed. And because this method first appeared in the United States, it is
colloquially referred to as American mortgage. It is safe and it has nothing in
common with the American risky sub-prime market.
Somehow, it does not seem to me that the crisis will not touch
Europe. Just look what happened in the Benelux.
Quite the opposite. The way the crisis in Europe is developing, or, more
precisely, in the Benelux, has created a certain precedent. That means
that banks which had problems were either taken over by other banks or helped
by the central banks and the state (government). All that was approved by
the EU. A similar scenario could be expected in this country, too.
The Czech banking sector is relatively isolated from the crisis. That
is also the message of the Czech National Bank based on its statement
yesterday. There is no reason for fear.