Belgium's financial institutions have condemned the Federal Government's decision to impose €150 million worth of taxes on the country's banks in its newly announced budget. They argue that the measure will deprive commercial banks of the "oxygen" required to raise savings rates.
Speaking to De Ochtend radio programme on Radio 1 on Tuesday morning just hours after the "Vivaldi" coalition government announced its long-awaited fiscal plans for 2024, Karel Baert, the CEO of Febelfin (the Belgian financial sector federation), also warned that the levy could negatively impact the rest of the Belgian economy.
"This decision affects the ability of banks to support the economy, families, and businesses," Baert said, adding: "It deprives banks of the opportunity to raise the savings rate even further. So banks will get even less oxygen."
Rate resistance
Belgium's financial institutions have come under increasing pressure to increase their savings rates over the past few months, as repeated rate hikes by the European Central Bank (ECB) have largely failed to be passed onto savers.
According to figures recently published by De Tijd, Belgium's six largest banks (BNP Paribas Fortis, KBC, ING Belgium, Belfius, Argenta and Crelan) recorded total net earnings of €3.1 billion over the first six months of 2023 – roughly a quarter more compared to the same period last year.
Last month, leading consumer rights group Test Achats noted that the discrepancy between the ECB rate and the interest rates offered to savers is the primary cause of soaring profits for Belgian banks.
"While banks can now deposit their money at the European Central Bank at 4%, the average interest rate on savings accounts in July was only 0.49%," Test Achats noted. "This is an unfair and unacceptable situation."
Baert acknowledged that banks have indeed enjoyed bumper earnings over the past year but argued that Belgium's financial sector "does not record more profits than in other countries". He claimed that high profit margins are a necessary financial buffer during tougher times and criticised the Federal Government for seeing banks as "merely as a kind of means of closing the gap in the budget".
'Too embarrassing for words'
Baert's comments were almost immediately condemned as "ridiculous" by Melissa Depraetere, a member of the Dutch-speaking socialist party Vooruit and a long-time critic of Belgium's banking sector.
"Febelfin's reaction is too embarrassing for words," Depraetere told Het Laatste Nieuws. "This year alone, the four major banks in our country can knock off €7 billion in profit, which is another significant increase compared to last year... There will certainly be enough money left to raise interest rates as well."
Depraetere also expressed disappointment that the recent issuance of the "Van Peteghem" high-yield government bonds largely failed to encourage banks to raise rates on their own. "We have been asking for six months to raise interest rates, the big banks are completely ignoring that... Even the success of the state bond did not move them. What do they expect? That we just let them sit back?"
Melissa Depraetere. Credit: Belga / Dirk Waem
Depraetere repeated her warning that the Federal Government might well consider "forcing" banks to hike rates over the next few months: a move long resisted by Febelfin, which claims that such an "ill-considered intervention... could profoundly affect the stability of the banking sector".
Depraetere's suggestion, however, has received explicit support from Test Achats. In particular, the group has called on Belgian policymakers to impose a minimum savings rate set at 1 percentage point below the ECB benchmark rate (i.e. 3%): almost thirty times higher than the current minimum rate of 0.11%.
