BNP Paribas Fortis warns that eliminating the loyalty bonus is bad for customers

The federal government is considering reform of the savings market. This is what Alexia Bertrand (Open VLD), Secretary of State for Consumer Protection, wants, Banks are no longer obligated to give their customers an honesty bonus. This is supposed to ensure that savers can switch to a competitor more quickly if they receive better savings terms. BNP Paribas Fortis warns that eliminating the Fidelity Bonus could have serious consequences for customers.

Context: The FSMA and the National Bank of Belgium (NBB) recently indicated that they are not opposed to the abolition of the fidelity premium.

• As a result of these recommendations, discussions are taking place within the government about the structure of the savings interest rate. This usually consists of the base interest rate and fidelity premium.
  • The principal interest is calculated based on how long the money stays in your account during the year. This compensation is usually paid at the beginning of the new year. If your funds are able to make a full year in that time, you will receive full compensation. If not, you will receive a portion of the basic benefit.
  • On the other hand, you will only get the Fidelity Premium if you commit your money for twelve consecutive months. If you withdraw early, you will lose your entire premium. This is usually paid at the beginning of the new quarter.
• Bertrand actually supports abolition. “Customers who want to hold their money short-term should be offered accounts that only offer a base interest rate,” she said last month. “Anyone who can save their savings for more than twelve months should still be able to choose a formula with a fidelity premium.”
• There are also intermediate solutions. According to the National Bank of Bahrain, the government could, for example, shorten the duration of the fidelity bonus to six months. The question is whether such an arrangement effectively makes savings accounts less complex.

Banks oppose the abolition of the fidelity bonus

In the news: In any case, financial institutions are big fans of such a reform of savings rates. They warn that this will put pressure on their financial stability. After all, savings deposits are used to make mortgage loans. In an interview with Trends.be Michael Ancio, CEO of BNP Paribas Fortis, warns that the cancellation also has consequences for customers.

• “We have a unique system in Belgium where banks offer mortgage loans at a fixed interest rate. 87% of housing loans at BNP Paribas Fortis are of this type.” This system is made possible thanks to the stability of savings deposits, and this stability is partly guaranteed by a premium Fidelity.” In other words, banks would be less inclined to make permanent housing loans if premiums disappeared.
  • The apex bank adds that fixed credits have protected clients from interest rate increases in 2023. BNP Paribas Fortis' residential loan portfolio amounts to €66 billion. Last year, customers repaid $1.2 billion in principal and interest on this outstanding amount. “If these loans had been issued at a variable interest rate, €1.8 billion would have flowed into the bank,” says Ancio. “This means that our clients have retained a purchasing power of €600 million thanks to the fixed interest rate. Money they would otherwise have to pay us.”
• The Veblevin Banking Union warned earlier that the cancellation also negatively affects savers themselves, at least when interest rates on savings fall. The Fidelity Bonus allows them to protect their savings from falling interest rates for a twelve-month period. The installment is fixed for one year at a time (after payment or expiry of the previous installment). Therefore any changes in interest rates during that period have no direct impact on that portion of interest on saving. This is the case with the base interest rate.
  • “The general expectation is that market interest rates will be lower by the end of 2024. In this case, the abolition of the fidelity premium will result in lower interest income for the saver than if the system remained,” the union said.

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