Banking sector struggles with low interest rates

Banking sector struggles with low interest rates

Persistently low interest rates is making it difficult for smaller banks to remain profitable.

In addition several structural changes such as digitalisation and cybersecurity are adding to the sector's challenges, the Belgian National Bank (BNB) concluded in its annual report. 

“The four big Belgian banks (unnamed, but assumed to be BNP Paribas Fortis, KBC, ING Belgium and Belfius) remain profitable, but the smaller banks continue to struggle and they are hampered by the financial policy,” BNB governor Pierre Wunsch remarked. This could lead to a consolidation within the sector. For example, Axa Bank was recently bought by Crelan a few months ago. 

When asked whether the negative interest rates are a bad omen for the NewB cooperative, Wunsch said he didn’t want to comment on a specific case.

NewB has just received the green light to become a bank and will begin offering its first banking services over the next few months. Although “small universal banks are suffering more, some specialist banks are doing very well,” the governor said.

He also remarked that NewB launched under a specific business model. NewB wants to set itself apart by presenting itself as “ethical and sustainable” and announced it wants to offer credits entirely dedicated to soft mobility, building energy efficiency and low-level renewable energy production. 

“We asked NewB to undergo a series of tests and one of these tests was being able to gather enough capital,” the governor explained. NewB managed to gather €35 million during a campaign to acquire capital. This shows “they can attract a certain group,” Wunsch added.  

The Brussels Times

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