Belgium's banks are all in good enough financial health to be able to increase rates on their customers' savings accounts, a recent study has found.
The report, which was published by the IESEG School of Management on Thursday, also noted that the country's financial institutions have sufficient liquidity buffers to survive a second issuance of high-yield government bonds later this year.
"All banks still have a margin to increase the rate on the total amount of regulated savings deposits without making losses," the IESEG reported. It stressed that "large, highly diversified banks" have the greatest room for manoeuvre, including BNP Paribas Fortis, KBC, Belfius, ING, Crelan, Argenta, CPH and vdk.
"Belgian banks have very abundant liquidity," it added. "This could allow them to suffer a similar deposit leak in December to the one they are facing now following the purchases of government bonds by their customers."
Enormous demand for the recently issued special one-year state bonds led to billions of euros flowing from Belgium's financial sector to the government, raising fears about banks' solvency.
According to l'Echo, €6.2 billion worth of sales were made with funds deposited at BNP Paribas Fortis while €4 billion were made with savings held at Belfius. €21.9 billion worth of bonds were purchased in total.
Hitting the jackpot
The IESEG study comes just one day after De Tijd reported that Belgium's six largest banks (BNP Paribas Fortis, KBC, ING Belgium, Belfius, Argenta and Crelan) recorded total net earnings of €3.1 billion over the first six months of 2023 – roughly a quarter more compared to the same period last year.
Notably, both De Tijd and the IESEG attributed banks' soaring profitability almost exclusively to the tight monetary policy of the European Central Bank (ECB), which has raised interest rates on nine consecutive occasions over the past year.
The IESEG also suggested that commonality of interest, rather than lack of competition, is the key factor underlying banks' refusal to hike rates.
"There are still enough different banks for there to be competition," the study noted. "The explanation is that they have little interest in competing to attract customer deposits as long as the abundance of liquidity caused by the exceptionally accommodating monetary policy of the ECB since the middle of last year persists."
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Interestingly, the IESEG study only partially aligned with a recent analysis by the National Bank of Belgium (NBB) Governor Pierre Wunsch, who also reported that Belgium's banks "are not in danger" following the bond sale.
Unlike the IESEG, Wunsch argued that banks "do not have a huge amount of space" to increase rates and suggested that they might not withstand a second government bond issue later this year.
