21 May 2023 - 4 min Reading time
A few months ago, the European Central Bank (ECB) decided to systematically raise the deposit rate in order to curb inflation. The deposit rate is the interest that banks receive when they deposit their excess savings with the ECB. As a result, many banks have decided in recent months to increase the savings interest on regulated savings accounts. Each bank takes that decision individually on the basis of a risk analysis and in line with its commercial policy.
The banking sector plays an important social role in the financing of individuals, companies and government in Belgium. Each bank has a different business model and must carry out its own risk analysis and estimate which savings interest rate it can offer. An ill-considered intervention by the government in the delicate mechanism of bank refinancing could seriously undermine the stability of the banking sector.
After all, the interest on savings is not solely determined by the deposit rate of the ECB. We should not forget that we are coming out of a long period of low interest rates, during which the ECB's deposit rate was even negative. Some factors that come into play:
Each bank has a different business model and in view of the above factors, it is important that each bank can make a correct assessment of the savings interest rate it can offer, taking into account the necessary long-term risk analyses. Carelessly limiting the ability of banks to carry out this risk analysis themselves and to estimate what interest rates on savings can be offered in order to achieve the right balance between the short and long term is counterproductive and has a far-reaching effect on the stability of the banking sector. Any legal initiatives to determine the minimum interest rate on savings are not only far-reaching interference from the government in the market, but will also affect the role that banks can play in the economy. It also demonstrates a lack of consistency in government policy to significantly increase the contributions to the banks' deposits for the budget - and therefore for itself - and, on the other hand, to ask the banks to offer more interest on savings to their customers.
We benefit from a strong and solid banking sector that is resistant to shocks and that can serve the needs of households, businesses and the government as much as possible. The turbulence in the US financial sector further underlines the importance of having a healthy banking sector. In recent years, European and Belgian banks in particular have significantly strengthened both their capital and liquidity positions. Both are built from the profitability of the financial institutions. As the recent banking crisis in the United States has shown, it is very important that banks maintain a strong liquidity buffer in order to be able to meet withdrawals from their depositors at all times. These liquidity buffers are held in cash at the ECB, including as legal reserves, without being remunerated.
During the Covid health crisis and the recent Ukraine crisis, banks have gone beyond their role in providing financial support to families and businesses in need. This help was always made possible from the strong capital and liquidity buffers of the financial institutions. Even now we are faced with many challenges, such as the necessary transition to a more sustainable society, in which the banking sector wants to be a partner of the government and society. A role that she can only play if she is sufficiently strong and robust herself. It is time for the government to really consider us as a partner and not underestimate the social role that the banks play, in the interest of families, companies and government.
Febelfin therefore calls on the government to reflect thoroughly on the impact of any legal initiatives on the Belgian banking sector, and by extension the entire Belgian economy.