Belgian Prime Minister Alexander De Croo has announced that the Federal Government will intervene if the country's banks continue to refuse to raise interest rates on customers' savings accounts.
"I am someone who believes in the free market, but if the free market does not work, then one must intervene," De Croo said on Radio 1 on Monday morning, in comments that were subsequently reported by Belga News Agency. "If we don't see movement, we're going to bring movement."
De Croo's remarks echoed previous comments by State Secretary for Consumer Affairs Alexia Bertrand (Open VLD). In an interview with De Tijd which was published on Sunday, Bertrand suggested that the Federal Government would mandate rate hikes if banks failed to implement them themselves before the end of June.
"I still have a little patience, until the end of this month," she said. "If there is no response from the banks, everything will be discussed, including the very last resort: intervening [to raise] the minimum interest rate", she added.
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Banks have come under increasing pressure to increase their savings rates over the past few months, as repeated interest rate hikes by the European Central Bank (ECB) have largely failed to be passed onto savers.
In particular, the current average rate on Belgian customers' savings deposits is 0.37%, despite the fact that the rate earned by Belgian banks from parking their excess cash overnight at Belgium's central bank (the ECB's 'deposit facility rate') is 3.25%.
This discrepancy has led some members of Belgium's Vivaldi Federal Government coalition – including, most notably, Flemish social democratic party Vooruit – to propose enforcing a rate increase by indexing the minimum savings rate to the ECB's deposit facility rate.
An 'ill-considered intervention'?
Belgian banks have vigorously pushed back against such proposals, however. Febelfin, the Belgian financial sector federation, said last month that any mandated increase would be an "ill-considered intervention" which could "profoundly affect the stability of the banking sector."
Febelfin's remarks were partially corroborated by a report published on Friday by the National Bank of Belgium (NBB), which warned that such legislation could have "far-reaching consequences for banks' profitability, interest rate risk management and solvency and, by extension, financial stability."
Instead, the NBB recommended that Belgium's banks implement rate hikes themselves. Above all, they should "continue working towards a gradual increase in the remuneration of regulated savings accounts, which should eventually be closer to the ECB rate."