Evolution of Interest Rates for Banks in Belgium and the Netherlands

After the 2008 financial crisis, the European Central Bank (ECB) began reducing its key interest rates starting in October of that year. This trend continued into the early 2010s, especially with the emergence of the European debt crisis. In March 2016, ECB key interest rates reached their lowest point and remained stable until recently, with a minor adjustment in September 2019.

However, starting in late July 2022, rising inflationary pressures prompted the ECB to gradually increase its key interest rates to relatively high levels. Consequently, banks have been gradually adjusting the interest rates they offer to their customers. Customers have grown accustomed to low rates on various financial products over the past decade[1], they are now beginning to notice that savings accounts are providing significantly lower returns compared to other investment options like term accounts and bonds. 

Given this situation, it is insightful to explore the strategies employed by banks in the Netherlands and Belgium to either retain or discourage the outflow of funds from savings accounts.

The top 10 banks in terms of market share in the Netherlands and Belgium were initially considered for this study. The banks for which pre-conditions are required to be a client were not included in the study. [2]

While the Dutch banks are limiting access to some savings accounts offered to a certain population ((grand)parent for their minor child), Belgian banks are offering higher diversity (more options for the general public). The main options proposed are:

• Fidelity premium (in Dutch: getrouwheidspremie): the interest rate is applied only on the portion of the money that remained in the account for the whole year (this is applied to all Belgian savings accounts and for NIBC in the Netherlands);
• Maximum amount per month on which interest rate is applied (proposed by 4 Belgian banks);
• Amounts upwards of a certain amount are eligible for a higher interest rate (only Beobank);
  • Almost all Dutch banks (except ABN Amro, DHB & NIBC) have the opposite, the interest rate decreases as the amount increases.
• The minimum amount that needs to be deposited in the savings account.

Interest rate data was collected from January 2021 to September 2023.

Since the interest rate received depends on certain conditions for some banks, and in order to propose a unique comparable figure, a synthetic average interest rate was computed with the following guidelines:

• A fictive amount of €100.000 was considered;
• For all days, the savings account offering the highest interest rate with acceptable conditions[3] was considered for all banks:
  • Conditions seen as acceptable: Fidelity premium;
  • Conditions seen as not acceptable: earning additional interest only on a defined monthly fixed amount wired to the account; having to deposit a minimum amount to earn interest; not being able to fully withdraw your money at any time.

Let’s take the case of ASN savings account as an example:

• On 10/02/2023, ASN announced that from 01/03/2023 onwards interest rates would increase to 0,4% for the first €25k; 0,3% over the next 25K; 0,2% for any remaining amount;
• The average interest rate on €100k account was thus (0,4% x 25%) + (0,3% x 25%) + (0,2% x 50%) = 0,275%.

Among our peer group representing the biggest banks in each country, the current average interest rate is slightly superior in the Netherlands (1,54%) than in Belgium (1,32%):

• In the Netherlands:
  • The highest rates are offered by DHB Bank and NIBC which are the only banks above 2%;
  • While the next 2 banks (Rabobank and Knab) are offering rates between 1,50% and 2%, all the other banks offer rates between 1,16% and 1,35%.
• In Belgium:
  • The highest interest rates are offered by Keytrade offering 2,10%;
  • The next 5 banks (Nagelmackers, BNPPF, ING, Crelan and Belfius) are offering between 1,25% and 1,60%;
  • The last 3 banks (KBC, Beobank and Argenta) are offering between 0,85% and 1,00%.
    • It is to be noted that those banks are offering much higher interest rates on accounts with strict restrictions (respectively 1,50%; 1,50% and 2,25% – see methodology).

Regarding differences between the Netherlands and Belgium (especially regarding the timing at which banks raised their rate) it is interesting to note the following:

• Belgian banks took much more time to initially raise their rates compared to the Netherlands:
  • 1st bank to raise rates: NIBC (NL) on 24/06/22 compared to Keytrade (BE) on 01/12/23;
  • ½ of Dutch peer group banks raised their rates by 01/12/22 compared to 01/02/23 in Belgium.
• Dutch banks increased interest rates much more gradually than Belgian banks:
  • Dutch banks increased their interest rate 6,5 times on average compared to 2,33 times in Belgium;
  • Inversely, the average amount of the increase per increase of Belgian banks (0,52%) is higher than Dutch banks (0,23%);
  • All in all, the average interest rate was:
    • Higher in Belgium before 23/11/22 and between 08/01/23 and 26/05/23;
    • Higher in the Netherlands the rest of the time.
• ING in the Netherlands offers the lowest interest rate of all Dutch banks whereas in Belgium they are close to offering the highest interest rate of all Belgian banks (and a rate higher than in the Netherlands).

In summary, despite the banks gradually raising their interest rates, the speed of this increase remains notably sluggish.

Local governments are eager to express their concerns and take actions to promote change:

• Recently, the Belgian federal government issued a 1-year bond with a 2.81% interest rate, raising an impressive €22.36 billion in an effort to encourage banks to raise interest rates on savings accounts:
  • It is challenging to determine whether subsequent rate hikes by banks were influenced by this initiative or if they would have occurred independently;
  • Banks publicly argued that this move was counterproductive, as the money from savings accounts flowed into funding the Belgian bond, weakening their liquidity position, and thus hindering their ability to increase interest rates.

In the Netherlands, despite having a huge number of players, the market is particularly concentrated as the top 3 has a combined market share of 74%), the next 6 Dutch banks have a combined market share of almost 6%. The remaining 20% of the market share consists of a significantly high numbers of banks with a low market share each that are excluded from this study.

The Belgian market is more fragmented as the top 3 banks have a combined market share of 56% and only 3 out of the 10 banks in the sample size have a market share lower than 1%.

A negative but weak relationship between interest rate and market concentration is observed for both countries:

• When looking at each bank, the general negative relationship is observed with few exceptions: smaller Dutch banks are offering much higher (4 cases) or equal (2 cases) interest rate than bigger banks;
• A limited number of smaller Belgian banks are offering interest rate that is equal (Crelan) or even smaller (Argenta and Beobank) than most bigger banks.

Smaller banks seem to often rely on the savings account interest rate as a prominent symbol of visibility to entice new customers.

Initially, Dutch banks had lower interest rates compared to Belgian banks:

• In Belgium, all banks began with a 0,11% interest rate (comprising a 0,01% base rate and a 0,10% fidelity rate), which in fact represents the legal minimum. The rationale behind having a legal minimum rate includes consumer protection, the maintenance of financial stability, and the achievement of broader economic and financial policy objectives.
• In the Netherlands, most banks initiated with negative interest rates, as there is no legal minimum, except for DHB and NIBC, which, due to their status as smaller banks and competitive positioning, never offered negative rates.

When examining the time gap between the announcement and implementation of interest rate increases (referred to as delay), a slight distinction is observed between the Netherlands (20,5 days) and Belgium (19,8 days):

• In the Netherlands, the delay for larger banks (36 days) is up to three times more significant than that for smaller banks (13 days);
• In Belgium, all banks have very similar delay times, except for Keytrade, which experiences a notably smaller delay.

It is also interesting to note the interrelation between the moves of large banks in both countries:

• In the Netherlands, the differences between the large banks are small, but Rabobank seems to be ahead slightly in terms of speed and amount followed by ABN and ING.

• In Belgium there is a different situation:
  • BNPPF was the last bank to increase the interest rate initially, but they did it to such a high rate that they remained on top until the other banks increased their interest rate for a second time;
  • Belfius is always the first to increase interest rates, but BNPPF and ING Belgium both offer higher interest rates when responding to Belfius;
  • KBC after the increases offers the lowest rates of all the large banks in Belgium.

The ECB has raised its key rates by over 4% since July 2022, but Dutch and Belgian banks have, on average, increased their savings account rates by less than 1.5%. In the Netherlands, smaller banks tend to react more swiftly to ECB interest rate changes, implementing rate adjustments more frequently and with less delay. Conversely, larger banks in the Netherlands respond more slowly, making smaller rate adjustments, and announcing changes well in advance. These differences likely stem from variations in their business models, with smaller banks often operating using alternative models, such as subscription-based approaches, enabling them to cover operating costs effectively and adopt a more aggressive strategy.

In Belgium, this division in responsiveness does not seem to exist, as all banks are slow to react and adjust rates less frequently in comparison with the Netherlands. This may partly be explained by the legal minimum interest rate in Belgium, which was (also) in place when the ECB had a negative interest rate and thus Belgian banks had to pay the ECB to hold reserves despite offering positive interest rates to clients.

With the ECB indicating on September 14th that its latest rate hike would likely be its last, economists generally believe that there is room for banks to increase savings deposit rates. It will be intriguing to observe how banks navigate this, taking into account potential shifts in customer behaviour and growing political pressure, especially from the Belgian government.

This study also highlights the diversity in savings account offerings, suggesting that many banks may consider offering higher interest rates on new accounts with stricter conditions to meet customer demands while maintaining profitability. Additionally, Dutch and Belgian banks must address options that allow customers to move their savings across multiple jurisdictions.

[1] NL: In 2018, 7% chance of switching savings account (partly influenced by interest rate) (DNB)

BE: Customers remain mostly loyal customers, there is barely a switch of savings account (VRT)

[2] The following banks were not considered:

• As it is accessible only under certain condition(s): Bank Nederlandse Gemeenten (Dutch government-employee only), RBS N.V. (No longer active in the Netherlands), Deutsche Bank (minimum €50k deposit)
• As it does not offer any savings accounts: Nederlandse Waterschapsbank

[3] The following savings account offerings were not considered due to the stringent conditions linked to earning IR proposed:

• As there is a notice period of 99/90 days to withdraw money: DHB CombiSpaarrekening 99 & Rabo TijdslotSparen 90
• As the significant part of interest rate are applicable only
  • On limited amount of money per month (€500): Argenta Groeirekening spaarrekening, ING Tempo Sparen, KBC Start2Save
  • On limited amount of money after a minimum threshold (from any amount from €50k) : Beobank Save Plus spaarrekening