While issuing the one-year State bond was a good move by the Federal Government, releasing another one on the same terms should not be repeated immediately, according to the governor of the National Bank of Belgium (NBB) Pierre Wunsch.
By issuing the special one-year State bonds with a net yield of 2.81%, the Federal authorities wanted to encourage the banks to raise the interest rates on their own savings accounts – something that several of them effectively did.
"Some movement by the banks was expected by the government. And it is moving, slowly. But it is about finding the right balance. Banks do not have huge leeway. They cannot offer 3% to their customers," Wunsch said on Flemish radio.
"They have too many mortgage loans at relatively low interest rates to be able to do that," he said, adding that €20 billion even appears to be too much money in the short term.
"The Treasury does not need that. This State bond is not to be repeated, especially with €20 billion of input every month. Over €200 billion on an annual basis would be a problem," Wunsch added.
He also stressed that financial institutions need not panic, now that €20 billion has flowed from bank accounts into the Treasury. "It equals about 5% of deposits. That is not a negligible percentage, but it is not 25% either. It may have a small impact here and there."
"Fundamentally, it does not put banks at risk. If it proves necessary, they have access to central bank liquidity," Wunsch said. "We are going to keep an eye on that."
