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)
Date: 2023-06-28
Institutions: European Central Bank
Subjects: banking supervision, financial stability

EN 

ECB-PUBLIC 

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) 

Introduction and legal basis 

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 Article 2(1) of Council Decision 

98/415/EC1, 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 Article 127(2), 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. 

1.

Purpose of the draft laws

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 %). 

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Council  Decision  98/415/EC  of  29  June  1998  on  the  consultation  of  the  European  Central  Bank  by  national 
authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42). 

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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 

implementing the Belgian Federal Income Tax Code 1992 (the ‘RD/ITC’)2. In particular, the RD/ITC3 

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 Code4. 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. 

2  
3  
4  

See Article 2, 4° and 5°of the RD/ITC. 

See Article 2 of the RD/ITC. 

See Article 21, first limb, 5° of the Federal Income Tax Code. 

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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. 

2. 

Observations  

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 

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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. 

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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.  

This opinion will be published on EUR-Lex.  

Done at Frankfurt am Main, 28 June 2023. 

[signed] 

The President of the ECB 

Christine LAGARDE 

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