This article has been updated to include a response from ING.
Consumer rights organisation Test Achats has denounced the interest rates offered by ING to Belgian savers as a "legal scam" and suggested that the bank has deceived customers into believing that its rates are more generous than they actually are.
Under the newly proposed terms of ING's Tempo savings account, customers are purportedly offered a 2.25% total savings rate: a yield which superficially appears to be among the most generous offered by Belgium's four largest banks (KBC, BNP Paribas Fortis, Belfius, and ING).
But major consumer protection group Test Achats argues that the bank has intentionally "distorted competition". Analyst Nicolas Claeys points out that customers face at least two major obstacles which prevent them from benefiting from the 2.25% rate. Firstly, savers are prohibited from depositing more than €500 in their account per month. Secondly, the 2.25% rate is divided into a 0.75% base rate and a 1.5% "fidelity premium" rate which customers can only profit from after one year.
Claeys further calculated that a saver who added €200 to the ING account each month would collect a mere €13 in interest over the course of the first year – equivalent to a 0.98% total rate. After two years, the yield would rise to just 1.59%, while after three years it would only reach 1.80%.
"Over the entire life of the savings, [the rate] actually never reaches 2.25%," Claeys explained to l'Echo. "This is completely allowed by law. Banks pay for the loyalty of the saver. But suddenly, they have the right to display a rate that does not really correspond to reality. This distorts competition."
No interest in hiking
The revelation comes at a time when Belgium's banks are falling under increasing pressure to increase savings rates, as repeated interest rate hikes over the past year by the European Central Bank (ECB) have failed in large part to be passed onto savers.
One recent study by the IESEG School of Management observed that "while the ECB has already raised its key rates by [4 percentage points] over the past few months, the increase in the rates offered by Belgian banks on customer savings deposits has remained very limited". It stresses that there are margins for banks in Belgium to increase the rates on savings deposits
It is almost certain that the margin between these two rates (i.e. the interest rates provided to commercial banks by the ECB and the rates offered to savers by commercial banks) is driving the strong performance of Belgium's banks over 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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This discrepancy has led several members of Belgium's Vivaldi Federal Government coalition – including, most notably, Flemish social democratic party Vooruit – to propose enforcing a rate increase by indexing the minimum savings rate to the ECB's deposit facility rate. Fellow coalition partner Ecolo has also recently recommended a legal minimum rate of 3% for the first €10,000 deposited into any savings account.
Belgium's banks have pushed back vigorously against such proposals, however. Febelfin, the Belgian financial sector federation, warned earlier this year that any mandated rate increase would be an "ill-considered intervention" which could "profoundly affect the stability of the banking sector".
Febelfin's remarks were partially corroborated by a report published in June by the National Bank of Belgium (NBB), which cautioned that such legislation could have "far-reaching consequences for banks' profitability, interest rate risk management and solvency and, by extension, financial stability".
Update: Following the publication of this article, a spokesperson for ING contacted The Brussels Times and suggested that the "formula" used by Test Achats to calculate savers' earnings is "wrong" as it "is commonly used in an investment context, not a savings context".
"It is important to know that: 1) All banks are exposed to the same legal framework; 2) The legal framework is very strict about how the interests have to be calculated and communicated; 3) FSMA [Financial Services and Markets Authority, Belgium's financial regulatory agency] reviews all calculation- and communication practices," the spokesperson added.
The spokesperson further noted that "targeting ING" is "unfair" given that "all banks operate under the same legal framework". He also reiterated the bank's position that "ING Tempo Sparen offers the best conditions on the Belgian market for recurring savings products".
""In other words, our savers will get their 2.25%," the spokesperson concluded.
Test Achats have been contacted by The Brussels Times for further comment.
