Prague - The cabinet yesterday approved a proposal under which the government would guarantee 100 percent of bank account savings up to EUR 50,000, or about CZK 1.24 million.

The law amendment will now go before a vote in the Chamber of Deputies. The cabinet wants MPs to discuss the bill in express proceedings.

The government currently guarantees 90 percent of bank deposits up to EUR 25,000. That means that approximately three-fourths of all savings are eligible for 90 percent compensations should the bank go bankrupt. The new proposal would offer full coverage to 97 percent of all savings.

Analysts say that increasing the guarantees is necessary. One of the reasons is that some savers are already transferring their assets to countries where the guarantees are unlimited. Jiří Kunert, head of the Czech Banking Association, said some funds have already left the country.

Opposition Social Democrats (ČSSD) demand unlimited guarantees, which have been proposed in Austria, Germany and Slovakia. Coalition MP Vlastimil Tlustý (ODS) wants to extend the coverage to savings up to CZK 4 million.

Finance Minister Miroslav Kalousek has refused larger coverage than EUR 50,000, saying there is no reason for such a move for now since the domestic banks are in a very good financial condition.

The Banking Association said yesterday in a statement: "Czech banks are healthy. Increasing the guarantees for deposits is a measure with primarily psychological effects on the clients."

EU member states last week agreed they will increase the guarantees to at least EUR 50,000.