Belgium's environmental parties have called for sweeping reforms to the rules governing savings accounts, as political pressure mounts on the country's banks to provide customers with more competitive interest rates.
On Thursday, MPs from Ecolo and Groen (Belgium's French-speaking and Dutch-speaking green parties) tabled two bills in the Chamber of Representatives.
The first calls for the highly controversial fidelity premium rates to be scrapped, while the second demands a minimum base rate of 3% on the first €10,000 of customers' deposits.
Fidelity premium rates, unlike base rates, are only earned on funds left in savings accounts for at least one year. This means that customers who deposit money at regular intervals will typically receive significantly less than the total (i.e. base + premium) rate, regardless of when they withdraw their funds.
"With these fidelity premium rates, banks are giving the impression that they are providing an attractive interest rate, but customers usually end up cheated," said Dieter Van Besien of Groen (Flemish Greens) on Thursday.
Flemish Greens MP Dieter Van Besien. Credit: Belga / Nicolas Maeterlinck
Van Besien also condemned the fact that banks' recent savings rate hikes have largely come in the form of increases in the fidelity premium rather than base rates.
"The savings rate increases in our country remain minimal and we want to reverse that with this proposal," he added. "It is crucial that we have genuinely higher savings rates."
If approved, both of the parties' proposals would have profound ramifications for Belgium's banking sector. According to L'Echo, NIBC's Fidelity savings account currently offers the best total savings rate in Belgium, at 3% – 1.80 percentage points of which comes in the form of a fidelity premium.
By contrast, repeated interest rate hikes over the past year by the European Central Bank (ECB) mean that banks currently earn a record rate of 4% by depositing their money overnight at the ECB: a fact which has led to soaring profits across Belgium's financial sector.
A fractious coalition
The environmental parties' proposals are likely to receive significant support from several other members of Belgium's seven-party 'Vivaldi' coalition government.
Just last week, Economy Minister Pierre-Yves Dermagne (PS) explicitly called for fidelity premiums to be scrapped. "We wish to eliminate the distinction between the base rate and the fidelity premium rate linked to regulated savings accounts," he told L'Echo.
"[This will] allow consumers to more easily compare the offers of savings products between and within the different banks."
Economy Minister Pierre-Yves Dermagne. Credit: Belga / Eric Lalmand
However, Belgium's State Secretary for Consumer Protection Alexia Bertrand (Open VLD) has openly defended the legitimacy of fidelity premiums.
"We would like to leave the choice to the consumer to opt for an account with or without a fidelity premium," she said last week. "Some consumers feel that they will not need their savings for a while and will therefore be able to benefit from a fidelity premium."
Bertrand also noted that fidelity premiums "offer stability to the banking sector" insofar as they "allow banks to keep savers' deposits over the long term."
