A possible amendment to the Act on Building Societies (Ustawa o kasach oszczednosciowo-budowlanych) seriously threatens the development of the newly established Polish building societies.
On June 5 1997 a new Act on Building Societies came into force in Poland. The aim was to promote saving by the general public to enable the average person to invest in real property. The Polish housing-construction industry has suffered an enormous decline in recent years. This is partly due to the high level of mortgage-rates (up to 22% each year), making it impossible for an average person even to consider investment in real property. To overcome this obstacle, building societies were invented and established. The aim was to provide cheap credit facilities with rates of about 6% each year.
To promote savings, the state promised in the Act of June 5 1997 a premium of up to 30% to be added to the annual savings of an account holder with a building society. The minimum saving period was to be two years. After this period, an account holder was entitled to a credit in an amount equal to the amount of his or her savings.
This generous promotion was necessary because the interest rates on savings offered by building societies did not exceed 3% to 4% each year, in contrast to the interest rates on regular saving accounts or state bonds, ranging between 16% to 20% each year.
However, in this year's budgetary process the ministry of finance indicated that the high level of promotion (ie the premium rate) could not be maintained. It proposed a considerable cut of the maximum premium and an extension of the minimum saving period to four years. Additionally, the premium should be paid at the end of the saving period only and not annually.
If these proposals become reality, the future development and even the existence of the new building societies would be seriously jeopardized. Without high premiums paid by the state, savings with building societies would no longer be competitive.