The boss of Belgium's second largest bank has condemned the Federal Government's decision to issue special one-year "Van Peteghem bonds," arguing that they will compete unfairly against banks' traditional savings rates.
Speaking to l'Echo, KBC CEO Johan Thijs took particular issue with the fact that holders of the bonds, named after Federal Finance Minister Vincent Van Peteghem, will benefit from a special reduction of the usual bond withholding tax rate from 30% to 15%.
"If the government says it is doing this to favour a certain segment of the population, they must offer those benefits to all citizens who invest in similar products with a term of one year," he said.
KBC CEO Johan Thijs. Credit: Belga / James Arthur Gekiere
Thijs elaborated that he did not necessarily object to the fact that yields on the bonds will be higher than the savings rates currently offered by Belgium's banks.
"One of the arguments put forward by the government to justify the new state bond was that it wanted to offer investors a better return," Thijs said. "I understand that, but then, we must also reduce the withholding tax."
Yields on the Van Peteghem bonds are expected to be somewhere in the region of 2.6% and potentially even as high as 3%, with the exact rate set to be announced on 22 August. By contrast, the best short-term total savings rate offered by banks in Belgium is 1.5%.
Insufficiently persuasive
Belgium's banks have come under increasing pressure to increase their savings rates over the past few months, as repeated rate hikes by the European Central Bank (ECB) have largely failed to be passed onto savers.
Indeed, the Federal Government's decision to issue the special one-year bonds follows Van Peteghem's own failure to persuade Belgium's banks to increase their own savings rates.
Febelfin, the Belgian financial sector federation, vigorously rejected the Finance Minister's requested rate hikes, arguing that such actions "could profoundly affect the stability of the banking sector."
Related News
- Belgian banks push back against Government calls to raise savings rates
- 'We are getting closer': ECB hikes interest rates to record high
The ECB's current benchmark rate is 3.75%: 1.45 percentage points higher than the best long-term savings rate currently offered by Belgian banks.
According to a recent study by the IESEG School of Management, the margin between these two rates largely explains the strong performance of Belgian banks during much of the past year.
Indeed, in a press release published on Thursday, Thijs announced that KBC had recorded an "excellent" net profit of €966 million in the second quarter of this year: 9% more than over the same period in 2022. Thijs partly attributed the bank's strong performance to "higher net interest income."
