Belgian banks are in good enough financial health to be able to raise interest rates on their customers' savings accounts by up to 1.25 percentage points, a senior economist has claimed.
Speaking to Le Soir, Eric Dor, the Director of Economic Studies at the IESEG School of Management in Paris and Lille, calculated that repeated hikes in the European Central Bank's (ECB) deposit facility rate over the past year have led Belgium's commercial banks to accumulate a total of €4.2 billion in additional revenue.
Dor also pointed out that, with an estimated €285 billion currently being held in regulated savings accounts across Belgium, a 1 percentage point increase in savings rates would cost the country's financial sector a mere €2.85 billion.
"It seems that Belgian banks can withstand an increase of 0.5 to 1.25 percentage points of the minimum rate to be paid on regulated savings accounts," Dor said. He added that the variance in potential interest rate hikes is a consequence of the fact that the profits induced by the ECB's rate increases, although "widely shared", have not been apportioned equally among Belgium's commercial banks.
'Do what is necessary'
Dor's remarks were corroborated by another analysis published in April by the IESEG. The study found that in February 2023 the average rate on Belgian customers' savings deposits was just 0.35%, despite the fact that the rate earned by Belgian banks from parking their excess cash overnight at Belgium's central bank (i.e. the ECB's deposit facility rate) was 2.5% (now 3.25%).
The study noted that the margin between these two rates largely explains the strong performance of Belgian banks during much of the past year: BNP Paribas Fortis – Belgium's largest bank – posted a profit of €3.16 billion in 2022, up almost a fifth (18.8%) from 2021.
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"While the ECB has already raised its key rates by 3.5 percentage points [now 3.75 percentage points] over a few months, the increase in the rates offered by Belgian banks on customer savings deposits has remained very limited... In Belgium, there are margins for banks to increase the rates on savings deposits," the study noted.
Moreover, a report published on Wednesday by the National Bank of Belgium (NBB) similarly recommended that Belgian banks "gradually increase" the interest rates on their customers' savings accounts.
"We understand that we need to keep an eye on stability, but at the same time we encourage the Belgian sector to do what is necessary to ensure the loyalty of savers," said NBB Vice-Governor Steven Vanackere, in comments that were reported by Belga News Agency. "We must not abuse their patience."
