The Governor of Belgium's National Bank Pierre Wunsch believes there is still a margin for banks to further raise savings rates. Last year, banks came under fire for keeping rates low and even deceiving customers that rates were more generous than they were.
Wunsch, whose term as acting Governor of Belgium's central bank was extended temporarily earlier this month, has already in the past argued that the savings rate was too low. In recent months, most banks have raised it, however, there is still room for more growth, he said on "De Markt", a programme on VRT 1.
"If they have margin, it makes more sense to give," Wunsch argued. He does point out that it is a process that "won't be quick".
Fighting for savings
Last year, banks were heavily criticised for offering savers too low an interest rate compared to what banks themselves collect.
Compared to other European countries, interest rates on savings accounts in Belgium were significantly lower and far below the European Central Bank's (ECB) 4% benchmark deposit facility rate, a recent report by the IESEG School of Management showed.
At the end of summer last year, Federal Finance Minister Vincent Van Peteghem launched unique one-year State Bonds with a favourable net interest rate of 2.81%, significantly higher than returns offered on savings accounts by Belgian banks at the time. The aim was to compete with savings accounts as a means of pressuring banks to raise their interest rates.
Due to the position customers of banks were put in, the State Bonds were more popular than ever. It earned the treasury a record €21.9 billion and resulted in record amounts of cash being withdrawn from Belgian savings accounts as savers attempted to boost their returns with the special one-year government bonds.
While the phenomenon of customers withdrawing their funds to invest in other high-yield assets worried banks, it hardly spurred them to increase their rates to appropriate levels, even though this would reduce the flight from savings accounts. By comparison, those on term accounts, where money is fixed for a certain period, are higher.
However, Wunsch believes banks could still be encouraged to offer more attractive savings products.
