“The Government Bond Debate Isn’t Always Fair”

Finance Minister Vincent van Peteghem (CD&V) has launched a new government bond as an alternative to a savings account. But KBC CEO Johan Thijs speaks out about unfair competition. “It’s not illogical for banks to react nervously,” says economist Cillian de Schrader (UGent).

Does Thijs have a point?

“A lower tax rate applies to government bonds than to investment products from banks. Those who subscribe do not have to pay any costs for a securities account – such an account is nonetheless compulsory for those who invest with a bank. So I follow the logic of thejs. Banks must comply. with certain rules, but they do not apply to the alternative launched by the government.”

Aren’t government bonds just meant to warm up the banks to raise interest on a savings account?

“That’s right, yes. Competition between banks seems to be very low. The ECB’s interest rate policy has ensured that there is still room for savings accounts to yield more than today. It is always a matter of waiting for the first big bank to raise interest rates, and only then The rest will follow.

This government bond is actually a way to get banks moving without raising the statutory minimum interest rate. The logic is this: if they want to keep those savings with them, they have to increase the interest. It is not unreasonable for banks to react nervously to this, because the arguments about this are not always conducted completely honestly.

What do you mean by that?

In the media and in the rhetoric of a number of mainly left-wing parties, it sometimes appears that banks are only seeking short-term profit, when, of course, this is not the case. The savings that you and I have in a savings account actually mean very cheap financing for the banks. It is very important for them not to lose it. Banks are certainly considering whether it would be better to raise interest rates a bit and not lose their savers.

“By the way, banks should have given savers in recent years a higher return than they themselves received from the ECB. This is often forgotten.”

How secure is this government certification compared to a traditional savings account? It’s still an investment.

“The risk is very low. The money being invested in government bonds is guaranteed by the government. And that government remains a very reliable partner. With a savings account you are of course in the private sector, but the savings are also covered by a government guarantee. So there is almost no difference in terms of safety.”

“Both are very powerful ways to get your money to make something in the short term – you sign up for one year in government bonds. That’s the difference with other investments. Anyone who makes the step into deferred accounts or financial markets will have to risk more to get the same return and often What loses money for longer. This government bond is simply a very attractive way to invest your savings one way or another.”

Will this set in motion competition between banks and lead to higher rates of interest on savings?

“I think it will increase competition, yes. But it remains to be seen how successful this government bond will be. There are already many alternatives to a savings account, but Belgians continue to use this savings account en masse. This account is seen as a way to access your money immediately when it is It’s really necessary. With government bonds, your money is fixed, even if it’s only for a year.”

Between April and June, KBC recorded a net profit of nearly €1 billion. Isn’t it a bit of an exaggeration to shout shame at a little extra competition?

“The banking sector is actually doing very well at the moment. These are propitious times, but it would be wrong to show these profit numbers only in the short term. It is important that banks can arm themselves against future risks. The government also benefits from a strong and competitive banking sector.

If government bonds can help with that, I think that’s a good thing. I also think there is still room for interest on a savings account to grow. Because of the adjustments made by the ECB, the banks raised interest rates on home loans exponentially in a short period of time – which meant a bigger profit for the banks – but returns on savings books – which is a cost – followed much more slowly.”