Belgium will compete with banks (this is also interesting for Dutch savers)

1 What is this?

interest on savings. In Belgium, as in the Netherlands, there is concern about the interest rate divergence in commercial banks. The interest paid by individuals on their mortgages or other loans rose sharply, to 4.9 percent. The interest the same individual receives on his savings is rising much more slowly: so far around 1.7 per cent. Meanwhile, the big banks have seen their profits double in the first half of this year compared to the first half of 2022. Politicians in the Netherlands and Belgium have already called on banks to raise interest rates on their savings this spring, but that has not happened yet. He had a huge impact.

2 What’s new?

The Belgian government says it will now compete directly with banks to force them to raise interest rates on their savings. From Thursday to September 1, EU residents can subscribe to a so-called government bond: a loan from the Belgian state. Interest rate announced on Tuesday: 3.30 percent. And the tax charged on that interest is half as low as that levied on a commercial bank in Belgium: 15 per cent instead of 30 per cent. The term is one year, instead of the usual three to 10 years for government bonds. You can easily sign up online, without an intermediary, at www.destaatsbons.be.

3 How much return?

Those who can keep their savings for a year and lend them to the Belgian state will get their investment plus a net interest of 2.81 percent in one year. This is still less than inflation, but there is currently no risk-free form of saving that offers as much interest as inflation. That’s 2.81 percent net, much higher than a regular savings account. Opening a bank account is not necessary. It is more profitable than existing term deposits, as the funds are also tied up for a year. Securing funds in a foreign bank can lead to larger gains, but a minimum deposit is often applied. And the rescuer must overcome cold feet. The risk of bankruptcy of the Belgian government is very small.

4 Is this interesting for Dutch savers?

Yes, because Belgium serves “people from all over the European Union”. But, read the package insert carefully. Harald Bennink, professor of banking and finance at Tilburg University, says it may be interesting for those who are well prepared and can really save the amount invested for a year. “But you can’t get it back in the meantime, so you really have to be able to miss it. But given the interest rate, that’s certainly an option. Although the question is whether the Dutch will enroll en masse.” The Dutch are homeless, mostly. They keep their savings in the big banks and leave them there. They complain, but the money often stays there.” Waiting for government bonds from the Dutch government does not seem like a good strategy. Finance Minister Sigrid Kaag said on Wednesday that such an initiative is something to shape after the election. “Not for a caretaker government.”

5 What is the difference with regular government bonds?

Ordinary Dutch government bonds look suspiciously like the Belgian initiative. But it’s more complicated, because you have to go to the bank or to a ‘broker’, that is, an intermediary. The so-called “short-term debt note” issued by the Dutch government for one year now has a total interest rate of about 3.4 percent. So this is criticism as well. But there are differences. Many of the bonds that pay more favorable interest have longer maturities, often from three to ten years. Bennink: “On the other hand, you could sell a bond in the meantime, although of course that might be at a loss. But in an emergency you’re not stuck.”

6 How do banks interact in Belgium?

Banks talk about unfair competition. But banks big and small raised interest rates on Monday so that they could offer their savers exactly the same return as government bonds. In this sense, the Belgian government’s initiative is indeed profitable.