The four largest banks in the country and the government signed a memorandum on the establishment of a national development fund, according to a press release. The fund is an idea of PM Andrej Babis, who put it forward to kill the efforts of the CSSD to push through a bank asset tax. The fund will start with equity of CZK7bn and will be used on public infrastructure projects, as well as on healthcare and education, industry minister Karel Havlicek said. The banks that signed the memorandum are Ceska Sporitelna, CSOB, Komercni Bank and UniCredit Bank. This is investor capital, as the fund will be 100% controlled by the state. It will apply for an investment fund license from the CNB by the end of the year and is expected to start operations in the middle of 2020, Havlicek said. The fund will be run by a national investment board, which will include four representatives of the banks involved and four representatives of the state, while its president is going to become Vazil Hudak, currently EIB vice president. Havlicek added that the fund has the potential to finance projects up to five times its starting equity, which may have a major economic impact.
We remind that under the CSSD’s proposal for a bank asset tax, banks could have be exposed to a rate between 0.05% and 0.3% on their financial assets (possibly including even government bonds). The four banks that signed up for the fund would have faced the highest rate, at 0.3%, since their assets are above CZK300bn. It is the reason why these banks were so supportive of the initiative, as it will cost them far less to provide the seeding capital and then they will get return on their investment, which is much more preferable than paying a bank asset tax. Besides, banks can defend from criticism that a large share of their profits is repatriated to foreign owners, rather than invested in the domestic economy.