The largest maturity date in Belgium’s financial history. That is how Peter Adams, CEO of ING Belgium, describes today’s expiry of the much-debated one-year state note, on 4 September.
The moment has arrived: today, Belgium’s debt agency refunds the capital and interest into the accounts of approximately 634,000 holders of the state note. This means around 22.5 billion euro in savings is suddenly in search of a new home.
Both banks and insurers are eyeing this money keenly, having launched a range of products in recent weeks—from term accounts and savings certificates to bonds and Tak21 and Tak23 insurance policies. The Belgian government has also entered the competition, issuing a new state note, albeit without the favourable tax treatment of the previous issue. To the annoyance of the banks, the expiring state note was subject to a withholding tax of only 15 per cent, compared to the usual 30 per cent.
“Things have been hectic since last week. The bankers have to pull out all the stops”
Albert Verlinden, chairman, BZB-Fedafin
Is D-Day leading to large crowds at bank branches? “Indeed, it has been very hectic at bank branches and among other financial intermediaries since last week. Bankers are pulling out all the stops; everyone is on call, and the phones are constantly ringing,” says Albert Verlinden, president of the professional association BZB-Fedafin. “Everything revolves around subscriptions to new savings or investment products, primarily through temporary promotional offers. Customer appointments are limited to 45 minutes, allowing bankers to handle up to 10 appointments a day. I estimate this rush will continue for another week or two.”
For some smaller banks, the stakes are particularly high. Years ago, they saw a significant portion of their savings accounts flow into the state’s coffers, deteriorating their own liquidity positions. All banks are anxious about the possibility that their customers’ savings may not return, potentially moving elsewhere.
“Fortunately, this time there is no unfair tax competition due to the new state note. Therefore, I expect most of the 22 billion euro to flow back to the banking and insurance sectors,” says Verlinden.
Wake-up call
Independent stock market analyst Gert De Mesure offers praise for finance minister Vincent Van Peteghem, who initiated the state note last year. It came about because the major banks had not adjusted their savings rates in line with higher ECB policy rates, despite repeated calls from the government and regulators. As a result, the Belgian financial sector has been completely shaken up a year later, with a proliferation of savings and investment promotions, De Mesure observes.
“Van Peteghem intended to jolt the banks, and he has succeeded. The banking sector is waking up, and investors are benefiting. You could say that after the banks paid too little in savings interest last year, they may now be offering savers or investors more than necessary.”
Verlinden sees it differently. “It is not Van Peteghem who is waking up the banks. After all, did the interest rates on savings accounts rise that much in the end? That remains rather limited. So who was it? ING Belgium.”
The Belgian branch of the Dutch major bank launched a ‘pre-registration’ for an exceptional one-year term account as early as July. By the end of August, the bank announced a 3.8 per cent gross return (or 2.66 per cent net after withholding tax). Those who pre-registered were offered a bonus of 0.20 per cent gross.
An entire sector hounded
“Retrieving the state bonus billions is an absolute priority for us,” said CEO Adams during ING Belgium’s half-year results in August. Verlinden adds: “ING pressured the entire sector. Their returns set the benchmark for competitive term accounts at other banks.”
The next few days will reveal the extent of Belgian savers’ loyalty. While most attention is on fixed-income products, Benoît van den Hove, CEO of Euronext Brussels, hopes some of this capital will flow towards the stock market, particularly into smaller Belgian equities. However, for now, Euronext sees this as “a missed opportunity” for a cultural shift. “The focus is too much on short-term savings alternatives. Yet, numerous studies demonstrate that diversified equity investments yield the highest returns in the long term,” says Van den Hove.
So, will the coming days and weeks be a game-changer? “I can’t predict the future. I hope so, but I fear not. It is clear that in recent months, banks have been primarily focused on recouping savings rather than encouraging private investors to explore diversified savings and investment portfolios.”
Verlinden echoes a similar sentiment. “My wish is for broader customer discussions in bank branches, including options for exchange-linked products and longer-term investments. This time, let’s avoid the FOMO effect of a year ago. Back then, there was near-mass hysteria over the one-year state note, despite its yield (3.3 per cent gross, 2.81 per cent net) being lower than the expected inflation.”
Breaking the annual chain
Interestingly, banks are playing with maturities in their promotional campaigns. For instance, KBC has introduced a 13-month term account instead of the typical 12 months. “A crafty move to break the annual cycle so that customers cannot subscribe to offers from other banks a year later,” comments Ive Rosseel, a tax adviser with the trade union ACV, echoing criticism on LinkedIn.
However, Verlinden believes it is only logical for banks to spread maturities. “Otherwise, every year we face these massive maturities like on 4 September. If the dates are more staggered, there would be more competition throughout the year, not just at the beginning of September.”