text: Council Decision 98/415/EC of 29 June 1998

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42).

text: The law of 22 April 2019 modifying the law of 25 April 2014 on the statute and control of credit institutions and trading companies in order to establish a banking oath and a disciplinary regime (Loi du 22 avril 2019 modifiant la loi du 25 avril 2014 relative au statut et au contrôle des établissements de crédit et des sociétés de bourse en vue d'instaurer un serment bancaire et un régime disciplinaire / Wet van 22 april 2019 tot wijziging van de wet van 25 april 2014 op het statuut van en het toezicht op kredietinstellingen, betreffende de invoering van een bankierseed en een tuchtrechtelijke regeling), Moniteur Belge/Belgisch Staatsblad, 2 May 2019, p. 42442. 3 See general explanation section of Chapter 14 of the explanatory memorandum accompanying the draft law

text: Council Regulation No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions (OJ L 287, 29.10.2013, p. 63).

text: Available on the ECB’s Banking supervision website at www.bankingsupervision.europa.eu. 6 See paragraph 2.2 of Opinion

text: . All ECB Opinions are available on Eur-Lex. 7 The Law of 22 February 1998 establishing the organic status of the National Bank of Belgium “Loi du 22 février 1998 fixant le statut organique de la Banque Nationale de Belgique / Wet van 22 februari 1998 tot vatstelling van het organiek statuut van de Nationale Bank van België » as published in the annexes to the Belgian Official Gazette, (Moniteur Belge/Belgisch Staatsblad,) 28 March 1998, page 9377. 8

text: Regulation (EU) 2021/23

text: of the European Parliament and of the Council of 16 December 2020 and amending Regulations

text: (EU) No 1095/2010

text: (EU) No 648/2012

text: (EU) No 600/2014

text: (EU) No 806/2014

text: and

text: (EU) No 2015/2365

text: and Directives

text: and

text: (OJ L 22, 22.1.2021, p. 1). 9 See

text: Article 3 of Regulation (EU) 2021/23

text: See comments on articles 6 and 7 of the Explanatory Memorandum. 11 See judgment of 13 September 2022, Banka Slovenije,

text: , EU:C:2022:670, paragraphs 53, 54, 57 and 97. 12

text: Council Regulation (EC) No 3603/93 of 13 December 1993

text: specifying definitions for the application of the prohibitions referred to in ex-Articles

text: and

text: b(1) (OJ L 332, 31.12.1993, p. 1). 13 See judgment of 13 September 2022, Banka Slovenije,

text: , EU:C:2022:670, paragraphs 67 to 75 and 84. 14 See judgment of 13 September 2022, Banka Slovenije,

text: , EU:C:2022:670, paragraph 75.

text: See

text: Articles 12

text: bis and 12ter of the Organic Law of the NBB. 16 See judgment of 13 September 2022, Banka Slovenije,

text: , EU:C:2022:670, paragraph 97. 17 See judgment of 13 September 2022, Banka Slovenije,

text: , EU:C:2022:670, paragraph 105. 18 See judgment of 13 September 2022, Banka Slovenije,

text: , EU:C:2022:670, paragraphs 100 to 102. See Recital 4 of the CCP Recovery and Resolution Regulation.

text: Regulation (EU) 2019/38

text: of the European Parliament and of the Council of 20 June 2019 on a pan-European Personal Pension Product (OJ L 198, 25.7.2019, p. 1). 21 See Article 2(18) of the PEPP Regulation. 22 See Article 8 of the PEPP Regulation.

text: For example, new

text: article 37

text: nonies, § 3 and 4 inserted by Article 22 of the draft law refer to the assent only to the NBB. This is also the case in § 5 of this new

text: article 37

text: nonies.

title: Opinion of the European Central Bank of 27 June 2023 on the introduction of a banking oath and certain supervisory and resolution matters (CON/2023/17)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 27 June 2023 on the introduction of a banking oath and certain supervisory and resolution matters (

text: ) Introduction and legal basis

text: On 12 May 2023 the European Central Bank (ECB) received a request from the Belgian Minister for Finance for an opinion on a draft law containing various financial law provisions, including, inter alia, provisions concerning a banking oath and a disciplinary regime for persons working for credit institutions, and the adaptation of Belgian law to EU regulations concerning the resolution of central counterparties and a pan- European personal pension product (hereinafter the ‘draft law’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union (TFEU) and the third indent of

text: Article 2(1) of Council Decision 98/415/EC

text: , as the draft law relates to the Nationale Bank van België/Banque Nationale de Belgique (NBB) and the ECB’s tasks concerning the prudential supervision of credit institutions pursuant to Article 127(6) of the Treaty. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Banking oath and disciplinary regime for persons working for credit institutions

text: 1.1 Purpose of the draft law’s provisions on the banking oath and disciplinary regime 1.1.1 The draft law amends a Belgian law of 2019 to establish a banking oath and a disciplinary regime for persons who are working for credit institutions and intermediaries in banking and investment services, and who have a function linked to banking services. As noted in the explanatory memorandum accompanying the draft law , the Law of 2019, which has not yet come into force, formed part of the Belgian legislative response to the financial crisis in light of the lessons learned, particularly in view of the impact of the crisis on public confidence in the banking sector. The draft law pursues the same objective but modifies some features of the original regime. 1.1.2 The disciplinary regime introduced by the draft law applies to, among others, persons already subject to a fit and proper assessment by the NBB or the ECB. Any concerned person must take

text: an individual oath when they begin their function and follow a code of conduct when exercising their function. The Financial Services and Market Authority (FSMA) would, after consulting the NBB, adopt a regulation specifying the practical modalities of the individual declaration, and a Royal Decree would be adopted specifying the code of conduct that must be complied with. This code of conduct would impose general obligations and list prohibited behaviours. 1.1.3 The FSMA is the main competent authority ensuring compliance with the code of conduct. Pursuant to the draft law the FSMA is given powers of inquiry into any claim it receives or any information it discovers when exercising its competences. Specifically, if the FSMA is made aware of a potential breach of the code of conduct, the FSMA auditor is to conduct an inquiry. If the inquiry concerns a person working in a credit institution who is subject to a fit and proper assessment by the NBB or the ECB, the FSMA is to inform the NBB accordingly. The draft law specifies that the auditor exercises its function while respecting all rights of defence. 1.1.4 At the end of the inquiry, the auditor drafts a preliminary report and sends it to the person covered by the report, who is entitled to provide comments or to request additional instruction acts, both within a period of one month. If the auditor decides against proceeding with the requested additional instruction acts, this must be justified in the auditor’s final report. 1.1.5 The disciplinary regime introduced by the draft law also applies to persons who are not already subject to a fit and proper assessment by the NBB or the ECB, and the draft law provides that the FSMA is the competent authority to impose sanctions on such persons. Whereas the FSMA is not competent to impose any sanction if a report of the FSMA auditor pursuant to the draft law concerns a person already subject to a fit and proper assessment by the NBB or the ECB. In such a case, the FSMA is to share the final report with the NBB. If the report concerns a person working in a significant institution that is subject to prudential supervision by the ECB within the framework of the Single Supervisory Mechanism (SSM), the NBB is to forward the report to the ECB. When receiving the report, the NBB or the ECB, as the case may be, may at its sole discretion, decide to use it or not within the framework of the competences it already has, including the fit and proper assessment. 1.1.6 As noted in the explanatory memorandum, disciplinary actions taken by the FSMA are to be without prejudice to the supervisory powers of the NBB and the ECB, in particular as regards the exclusive powers of the NBB and the ECB under Council Regulation No 1024/2013 (hereinafter the ‘SSM Regulation’) with respect to fit and proper requirements. 1.2 Observations on the draft law’s provisions on the banking oath and the disciplinary regime 1.2.1 The ECB welcomes the measures envisaged by the draft law regarding the banking oath and disciplinary regime applicable to persons who work for credit institutions, and the fact that these measures are taken in the context of lessons learned from the financial crisis, in particular in view of its impact on public confidence in the financial sector, and more specifically in the banking sector. 1.2.2 Within the SSM, the FSMA’s reports will support suitability (re-)assessments by providing an additional source of information which will be taken into account when the suitability of an individual

text: is being (re-)assessed, in line with the ECB Guide to fit and proper assessments . The draft law’s measures will reinforce the governance framework of credit institutions. The behavioural patterns exhibited by persons having managerial functions linked to banking services, as well as the drivers that underpin that behaviour, are elements that determine how robust a credit institution’s governance framework is. It is imperative to adequately address unwarranted behaviour by individuals at a credit institution who decide to adopt a behaviour that would impact their professional honesty and integrity. If such acts have no apparent consequence, that will be noticed by staff in the credit institution, leading to the development of a new group norm. The overriding behaviour and culture within a credit institution are thus the product of both individual behaviour and the underlying culture that acts as a breeding ground for that behaviour. It is important for a credit institution to identify and be aware of the structures, beliefs and group dynamics which echo throughout the entire institution, and which may pose a risk to its performance and stability. Credit institutions’ management bodies should be attentive to these intangible but real underlying drivers of behaviour and, if warranted, acknowledge the need to shift the paradigm before it is too late and negative practices become the norm . 1.2.3 The ECB welcomes the fact that the explanatory memorandum expressly specifies that disciplinary actions of the FSMA are to be without prejudice to the prudential supervisory powers of the ECB and the NBB, in particular concerning fit and proper requirements. In this respect it is noted that the prudential supervisory powers of the ECB are provided for in the SSM Regulation, which constitutes the legal basis for the supervisory actions the ECB may decide to undertake.

text: 2. Amendment of Belgian law to implement Union legislation on recovery and resolution of central counterparties

text: 2.1 Purpose of the draft law’s provisions amending Belgian law to implement Union legislation on

text: 2.1.1 The draft law modifies the Law of 22 February 1998 establishing the organic status of the National Bank of Belgium (hereinafter the ‘Organic Law of the NBB’) in order to implement

text: Regulation (EU) 2021/23

text: of the European Parliament and of the Council (hereinafter the ‘CCP Recovery and Resolution Regulation’). In particular, the draft law implements the requirement under the CCP Recovery and Resolution Regulation that each Member State must designate one or more resolution authorities for central counterparties , which are empowered to apply the resolution tools and exercise the resolution powers as set out in the CCP Recovery and Resolution Regulation.

text: 2.1.2 The draft law appoints the NBB as resolution authority for the purposes of the CCP Recovery and Resolution Regulation. The NBB is to exercise these functions via the resolution college. This resolution college already exists and exercises resolution powers vis-à-vis other financial intermediaries, such as credit institutions and stockbroking firms. The explanatory memorandum of the draft law specifies that the resolution college is to act as a separate body from the other existing bodies of the NBB, in order to distinguish the NBB’s supervisory tasks from its resolution tasks and to avoid potential conflicts of interest . 2.1.3 The draft law specifies that the operating costs borne by the NBB as resolution authority will be covered by the central counterparties on the basis of modalities determined in a Royal Decree. 2.2 Observations on the designation of the NBB as resolution authority for central counterparties 2.2.1 In accordance with Article 14.4 of the Statute of the European System of Central Banks and of the European Central Bank, the national central banks (NCBs) may perform functions other than those specified in that Statute, unless the Governing Council finds that those functions interfere with the objectives and tasks of the European System of Central Banks (ESCB). Where a Member State assigns such a function to its NCB, that NCB is responsible and liable for the performance of that function. Nevertheless, when defining the responsibility and liability of an NCB in relation to that function, Member States are required to comply with their obligations deriving from Union law and, in particular,

text: Article 123(1)

text: and Article 130 of the TFEU . 2.2.2 Article 123(1) of the TFEU prohibits the NCBs from granting overdraft facilities or any other type of credit facility to public authorities and bodies of the Member States.

text: Article 1(1)

text: (b) of Council Regulation No 3603/93 defines the term ‘other type of credit facility’ for the purposes of Article 123 of the TFEU as , amongst others, any financing of the public sector’s obligations vis-à-vis third parties. Accordingly, the NCB concerned must not assume obligations vis-a vis third parties that could potentially be incumbent on the public sector. Consequently, the NCB concerned must not finance pre-existing obligations vis-à-vis third parties that are incumbent on other public authorities or bodies and the effective financing of the obligations vis-à-vis third parties by the NCB concerned must not result directly from the measures adopted by, or from the policy choices made by, other public authorities or bodies . 2.2.3 The ECB notes that while the draft law does not as such impose any financing obligations on the NBB, the designation of the NBB as resolution authority for central counterparties according to the CCP Recovery and Resolution Regulation requires that the conditions under which the NBB is to exercise this function are in line with the above limitations deriving from Article 123(1) of the TFEU. In particular, the liability of the NBB when exercising the function of resolution authority for central counterparties must be limited to infringements of a serious nature of the rules imposed on the NBB in that context . The draft law does not provide for a specific liability regime. In this respect, the

text: ECB understands that the applicable liability regime is the regime that already exists in relation to the resolution and supervisory tasks of the NBB. That liability regime provides for liability of the NBB only in the cases of gross negligence or fraud and specifies that the existence of gross negligence must be assessed taking into account the specific circumstances of the case at hand, including the urgency faced by the NBB and staff, financial market practices, the complexity of the specific case, threats to savings protection, and the risk of harm to the national economy . These limitations address the requirement that the liability of the NBB when exercising the function of resolution authority for central counterparties be limited to infringements of a serious nature. 2.2.4 Article 130 of the TFEU prohibits Member States from placing their NCBs in a situation which in any way undermines their ability to carry out independently a task falling within the scope of the ESCB . This would be the case if, for example, an NCB were precluded from building up adequate financial resources in the form of reserves or buffers to offset losses, particularly those resulting from monetary policy operations, and the Member State concerned did not ensure in advance that the NCB had the necessary funds to bear the financial burden resulting from exercising a function outside the scope of the ESCB (such as the funds necessary to be able to pay the compensation resulting from the liability regime for that function), while retaining its ability to carry out its ESCB tasks effectively and independently . An NCB constrained in its ability to create and/or restore its reserves or buffers may need to seek the consent of political authorities to obtain funding or recapitalisation. This places the NCB in a situation of dependence on those political authorities of the Member State .The ECB considers that the NBB’s risk of exposure to liability in the context of the exercise of its function as resolution authority for central counterparties is extremely remote due to: (a) the fact that no central counterparty is currently established in Belgium; (b) the exceptional nature of a situation leading to the resolution of a central counterparty; and (c) the limited liability of the NBB in such cases. However, the possibility cannot be entirely excluded that extreme and exceptional situations might arise at some point in the future and result in the exposure of the NBB to such liability. In this respect, a significant amount of the financial risk of the Union financial system is processed by and concentrated in central counterparties on behalf of clearing members and their clients .The possibility cannot be entirely excluded that the NBB’s exercise of its function as a resolution authority of central counterparties might lead to substantial losses and that the magnitude of such losses might constrain the NBB’s ability to build up adequate financial resources to carry out its ESCB tasks. To address such situations, if central counterparties would be established in Belgium, adequate mechanisms should be considered in advance of any future establishment of a central counterparty in Belgium in order to ensure that the NBB is not precluded from building up adequate financial resources in the form of reserves or buffers so as to be able to carry out its ESCB tasks effectively and independently.

text: 3. Amendment of Belgian law to implement Union legislation on a pan-European pension product

text: 3.1 Purpose of the draft law’s provisions amending Belgian law to implement Union legislation on a

text: pan-European personal pension product

text: 3.1.1 The draft law implements specific provisions of

text: Regulation (EU) 2019/38

text: of the European Parliament and of the Council (hereinafter the ‘PEPP Regulation’). In accordance with the provisions of the PEPP Regulation , the draft law appoints the FSMA as the competent authority to monitor compliance with the PEPP Regulation in Belgium. The draft law specifies that the FSMA exercises its function with the assent of the NBB, and that this assent relates to compliance with the PEPP Regulation to the extent that it falls within the scope of the NBB’s or ECB's prudential supervisory powers pursuant to the Organic Law of the NBB and the framework of the SSM Regulation, respectively. It appears from the explanatory memorandum that such assent of the NBB is required in two situations. First, if the relevant supplier or distributor of a pan-European pension product (PEPP) is under the supervision of the ECB or the NBB, the FSMA acts only after receiving the assent of the NBB. Second, such prior assent of the NBB before the FSMA acts is also required if the relevant supplier or distributor of a PEPP is under the supervision of the FSMA, but certain conditions that apply are within the competence of the NBB or the ECB. This refers, for example, to the situation where the relevant supplier or distributor under the supervision of the FSMA requires a guarantee from a credit institution. The draft law also specifies that the FSMA must require the assent of the NBB before accepting a registration request from an entity under the supervision of the NBB or the ECB. In that case, the assent relates to the conformity of the registration request with the PEPP Regulation to the extent that it falls within the scope of the NBB’s or the ECB's prudential supervisory powers pursuant to the Organic Law of the NBB and the framework of the SSM Regulation, respectively. 3.1.2 The NBB may also request the FSMA to prohibit an entity from commercialising a PEPP if certain conditions set out in the PEPP Regulation are met (for example, if the distributor has made false declarations) or if there are reasonable grounds to determine that the PEPP presents a risk for the stability of all or part of the financial system. 3.2 Observations on the draft law’s provisions amending Belgian law to implement Union legislation on

text: a pan-European pension product

text: 3.2.1 The draft law should clarify the reasons for the provisions that the FSMA’s supervision of compliance with the PEPP Regulation is exercised on the basis of assent by the NBB, in particular to the extent that such assent is intended to relate to aspects lying within the ECB’s competence as prudential supervisor. The link between supervising compliance with the PEPP Regulation and the ECB’s supervisory competences in the prudential field does not appear evident and assent should only be required insofar as the prudential supervisor’s tasks are directly affected.

text: 3.2.2 As a general remark in this respect, the ECB notes that the draft law contains certain inconsistencies in that it refers in some places to both the ECB and the NBB, and in other places only to the NBB . This opinion will be published on EUR-Lex. Done at Frankfurt am Main, 27 June 2023. [signed]

text: The President of the ECB

text: Christine LAGARDE


text: Council Decision 98/415/EC of 29 June 1998

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42).

text: See Article

text: ° and 5°of the RD/ITC.

text: See Article 2 of the RD/ITC.

text: See

text: Article 21

text: , first limb, 5° of the Federal Income Tax Code.

publisher: Europeiska centralbanken

sprak: en

title: Opinion of the European Central Bank of 28 June 2023 on tying the minimum base interest rate on regulated savings accounts to the deposit facility rate and introducing a protected interest rate on savings deposits (CON/2023/18)

serie: con

text: OPINION OF THE EUROPEAN CENTRAL BANK of 28 June 2023 on tying the minimum base interest rate on regulated savings accounts to the deposit facility rate and introducing a protected interest rate on savings deposits (

text: ) Introduction and legal basis

type: rubrik

text: On 31 May, 13 June and 14 June 2023, the European Central Bank (ECB) received three requests from the Governor of the Nationale Bank van België/Banque Nationale de Belgique (NBB), acting at the request of the Belgian Minister for Finance, for an opinion on three draft laws, respectively: (1) a draft law on tying the minimum base interest rate on regulated savings accounts to the ECB deposit facility rate (hereinafter the ‘first draft law’); (2) a draft law on tying the base rate on savings deposits to the ECB deposit facility rate (hereinafter the ‘second draft law’); and (3) a draft law introducing a protected interest rate on savings deposits (hereinafter the ‘third draft law’, together with the first and second draft laws collectively referred to as ‘the draft laws’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the third and the sixth indents of

text: Article 2(1) of Council Decision 98/415/EC

text: , as the draft laws relate to (1) the basic task of the European System of Central Banks (ESCB) to implement the monetary policy of the Union pursuant to

text: Article 127(2)

text: , first indent, of the Treaty, (2) the NBB, (3) rules applicable to financial institutions insofar as they materially influence the stability of financial institutions and markets and (4) the ECB’s tasks concerning the prudential supervision of credit institutions pursuant to Article 127(6) of the Treaty. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

type: stycke

text: 1. Purpose of the draft laws

text: 1.1 The key objective of the first draft law and of the second draft law is to introduce a new minimum base interest rate on regulated savings accounts held with credit institutions by households, which may not be lower than the ECB's deposit facility rate less two percentage points. The purpose of the third draft law is to introduce a protected base interest rate on the first EUR 10 000 of regulated savings deposits per depositor that is linked to the interest rate on Belgian 10-year sovereign bonds. These new minimum and protected interest rates will coexist with the current interest rate floor of 0.11 % (consisting of a base interest rate of 0.01 % and a fidelity premium rate of 0.10 %).

text: 1.2 According to the explanatory memoranda to the first draft law and to the second draft law: (1) the proposal to tie the minimum base interest rate on regulated savings accounts to the ECB's deposit facility rate is based, among others, on the consideration that although the deposit rate at which credit institutions are able to deposit money with the ECB in the short term increased to 3.25 % in May 2023, the average return on regulated savings accounts in Belgium during the same period remained lower than 1 %; (2) this low level of interest rate is due to the market power of Belgian credit institutions and a lack of competition on the Belgian banking market; and (3) tying the minimum base interest rate on regulated savings accounts to the ECB deposit facility rate would ensure a fair return on regulated savings accounts and a better transmission of monetary policy without risks to financial stability. 1.3 According to the explanatory memorandum to the third draft law, the proposal to introduce a protected base interest rate on the first EUR 10 000 of regulated savings deposits per depositor that is linked to the interest rate on Belgian 10-year sovereign bonds is based on the following considerations: (1) an inflation rate that is systematically higher than the remuneration of savings deposits results in a loss of value for money held on regulated savings accounts; (2) in a context of high inflation, it is particularly important to protect savings deposits held by households by guaranteeing reasonable but attractive interest rates; and (3) the devaluation of regulated savings deposits contrasts with the significant excess profits realised by the Belgian banking sector due to the rise in the ECB's interest rates. 1.4 The draft laws amend existing provisions of the Belgian Royal Decree of 27 August 1993 2 3 implementing the Belgian Federal Income Tax Code 1992 (the ‘RD/ITC’) . In particular, the RD/ITC sets out the conditions that savings deposits held with credit institutions by households on regulated savings accounts must comply with in order to benefit from the tax exemption set out in the Belgian Federal Income Tax Code . The first EUR 625 of income per year, the amount of which is indexed, arising from savings deposits is not considered part of capital and movable property income, and is hence exempted from related taxes. The relevant provisions of the RD/ITC that are amended by the draft laws specifically concern the remuneration of savings deposits held on regulated savings accounts. 1.5 The first draft law amends the relevant provisions of the RD/ITC by adding two new paragraphs providing that: (1) the base interest rate applied by an institution to the savings deposits it receives may not be lower than the ECB’s deposit facility rate applicable on the tenth day of the month preceding the current calendar half year, reduced by two percentage points; and (2) the Minister for Finance may, with the agreement of the Ministers responsible for the Economy and Consumers, grant a temporary derogation from this minimum base interest rate (for a specific institution or the sector as a whole) upon the recommendation of the NBB where the latter considers that the application of this new minimum base interest rate would lead to serious risks for financial stability. The first draft law enters into force on 1 July 2023.

text: 1.6 The second draft law also amends the relevant provisions of the RD/ITC by providing that: (1) the base interest rate applied by an institution to the savings deposits it receives cannot exceed three %; (2) the base interest rate applied by an institution to the savings deposits it receives may not be lower than the ECB’s deposit facility rate reduced by two percentage points; and (3) any increase or decrease in the ECB’s deposit facility rate is applied as from the first calendar day of the second month following the announcement by the ECB of a change to the deposit facility rate. The first adjustment of the base interest rate in accordance with the second draft law is applied as from the first calendar day of the second month following the publication of the law. 1.7 The third draft law also amends the relevant provisions of the RD/ITC by providing that: (1) in addition to the existing base interest rate and the fidelity premium, the remuneration of regulated savings deposits must also consist of a protected interest rate equivalent to the average interest rate of the Belgian 10-year sovereign bonds for the preceding calendar quarter; (2) the protected interest rate applies to the first EUR 10 000 of savings deposits per depositor and the existing base interest rate applies to that part of the savings deposit that exceeds EUR 10 000; and (3) the various rules applicable to the base interest rate also apply to the protected interest rate.

text: 2. Observations

text: 2.1 Effects on the transmission of monetary policy The ECB reiterates that it is generally not in favour of regulating savings remuneration, as this presents challenges for the efficient transmission of monetary policy. Deposits are a key source of funding for the banking sector, facilitating the smooth provision of credit to households and companies. Administrative control of deposit rates could interfere with the credit intermediation capacity of credit institutions, thereby presenting obstacles for the smooth transmission of monetary policy. Such concerns apply to forced increases in deposit rates, but also to the imposition of a nominal cap on the base interest rate paid to depositors, the level of which may prove inappropriate in future scenarios where the cap becomes binding. Moreover, the financial stability concerns highlighted in paragraph 2.2 can have further unwarranted impacts on the supply of credit. 2.2 Effects on financial stability The ECB observes that the implementation of the draft laws could result in a negative impact on the profitability of, the interest-rate risk management by, and the provision of credit by Belgian credit institutions, and ultimately is likely to have implications for financial stability. It is important to note that, among other factors, interference with the pricing of deposits was a contributing factor to the US savings and loan crisis in the 1980s. Savings deposits constitute an important source of funding for a significant number of Belgian credit institutions, which use them to fund mortgage loans, the bulk of which are granted at fixed interest rates. A sudden increase in the level of remuneration of savings deposits as proposed in the draft laws would impact financial stability on at least two fronts. First, the draft laws propose a substantial increase in the level of the remuneration of savings deposits with immediate effect. Such abrupt and material repricing of the outstanding stock of savings deposits (around EUR 300 billion, or one quarter of the Belgian banking sector’s balance

text: sheet) will suddenly increase credit institutions’ funding costs, while on the other side of their balance sheets their assets continue to reprice more gradually, notably due to the high share of fixed-rate mortgage loans in Belgium. Therefore, the proposed increase is likely to have a negative impact on the profitability of the banking sector or, in the case of the most vulnerable credit institutions, lead to outright losses. Credit institutions would have to absorb this negative impact and/or offset it, at least in part, by passing the higher funding costs on to customers – for example in the form of higher lending rates. The latter may lead to a further slowdown in credit institutions’ lending growth, or to a shift to lending by entities (for example non-banks and foreign banks) that are not affected by the draft laws. Second, the ECB considers that the implementation of the draft laws could undermine the effectiveness of the strategies adopted by credit institutions in the past years to hedge interest-rate risk in the banking book. While Belgian credit institutions have taken active steps to hedge their interest-rate risk to a significant extent, a gradual repricing of liabilities (including savings deposits) also plays a key role in the effective management of interest-rate risk in the banking book, by allowing credit institutions to match the interest-rate sensitivity of assets and liabilities. An unexpected shock to the level of remuneration of savings deposits resulting from the draft laws would generate interest-rate mismatches that the past interest-rate risk hedging strategies did not account for. This would particularly affect the interest-rate risk management of those credit institutions with a higher dependence on savings deposits and a higher share of fixed-rate mortgage loans on their balance sheets. The ECB acknowledges that the first draft law provides for the possibility of a derogation, which can be invoked in the case of risks to financial stability. If the first draft law is adopted and implemented as proposed, any recommendation that the NBB may make as to the existence of serious risks to the financial stability should be duly taken into consideration. 2.3 Effects on the banking sector Within the context of the direct supervision of significant euro area credit institutions, the ECB closely monitors the solvency, liquidity, and profitability of credit institutions. Credit institutions should not be prevented from generating sustainable profits, as this results in well-capitalised credit institutions that operate competitively and can continuously lend to customers on affordable terms as well as withstand potential macroeconomic shocks. The profitability (or lack thereof) of credit institutions depends on a variety of elements, one of which is the net interest rate margin. Using legislation to set the deposit interest rate – which is one element of the net interest margin – raises the prospect of unintended consequences, especially where macroeconomic conditions change. The alleged excess profitability in the Belgian banking sector is one of the drivers of the draft laws. However, while profitability levels differ between credit institutions, the average return on equity of 9.9 % in 2022 does not in the ECB’s view demonstrate excess and should be considered in the context of the current cost of equity, to which it is not disproportionate. Moreover, the interest rate margin – which had been under pressure during the period of very low interest rates – has now returned to levels similar to those seen prior to this period.

text: The draft laws would result in a sudden and sharp increase in the cost of funding. This would challenge bank profitability, as the repricing of the mortgage portfolio occurs only gradually, i.e. at the pace of repayment of the existing stock of loans. The draft laws’ uniform treatment of all credit institutions raises concerns, as the effects of the draft laws are likely to be highly unevenly distributed across Belgian credit institutions depending on their size and business model. In particular, smaller credit institutions and credit institutions more reliant on savings deposits in their funding structure and/or that have a higher share of long-term fixed-rate assets (such as mortgages) on the asset side of their balance sheet, would be more severely affected. The draft laws refer to the level of remuneration offered to credit institutions on their reserves held with the Eurosystem, and therefore target the difference between the interest rate that credit institutions receive from their deposits with the ECB and the interest rate that they pay to depositors. However, the smaller credit institutions and/or those that hold significant volumes of deposits, i.e. the credit institutions likely to be most affected by the draft laws, in practice make only very limited use of the ECB deposit facility. In fact, 45 % of the funds deposited with the ECB by Belgian credit institutions originate from Belgian credit institutions that do not offer savings accounts. Hence, the ECB deposit rate is unlikely to be an accurate indicator of the evolution of the interest earned on the asset side of the balance sheet of such credit institutions. Moreover, it should be kept in mind that in future the amount of reserves held by credit institutions with the Eurosystem may become lower due to a variety of factors. Finally, in accordance with applicable Union law, credit institutions themselves are primarily responsible for the sound management of the risks on their balance sheet, including for hedging their interest-rate risk. The ECB is concerned that the draft laws would interfere in the strategic and risk management of credit institutions.

text: This opinion will be published on EUR-Lex.

text: Done at Frankfurt am Main, 28 June 2023.

text: [signed]

text: The President of the ECB

text: Christine LAGARDE

type: vagledning

utgivare: ecb