Banks and insurers compete for state bond billions
More than half a million people subscribed to the state bond last year, with the money to be released in two weeks. But savings rates are likely to fall again, so banks are doing all they can to ensure new investments.
Last year's one-year bond issue was a record: 542,670 people subscribed, investing a total of just under 22 billion euros. Through the combination of a short term, a high interest rate of 3.3 per cent gross and a favourable tax regime, with a one-time reduced withholding tax of 15 per cent, the government put out an investment product with a higher return than the savings and term accounts offered by banks at that time.
The vast majority of the 22 billion euros was withdrawn from bank accounts. The initiative by Finance minister Vincent Van Peteghem was therefore not to be repeated, the National Bank of Belgium warned at the time, as it put the banks at risk.
Competition raging
With the invested funds soon to be freed up in the market again, banks and insurers are now rushing to entice investors. There is a lot of interest in the new state bond, even if the terms are less fiscally attractive, but banks want to see the money back in their accounts.
State-owned bank Belfius was the first major player to relaunch the cash note last spring, shortly followed by BNP Paribas Fortis, which has since issued several tranches.
The competition has been raging for several months and is likely to continue until early September. That offers a lot of options for savers who are willing to wait and see. However, half of those who invested in the state bond last year plan to do so again in September, according to a survey of 2,000 people by research firm iVOX commissioned by AG Insurance, the Belgian market leader in life insurance.
Due to sunken interest rates and the expiry of the reduced withholding tax, returns will be a lot lower and the state bond will not necessarily be the best option. Investors should therefore explore several options before subscribing again on 5 September.
BNP Paribas Fortis has launched several cash notes to entice investors © BELGA PHOTO PAUL-HENRI VERLOOY
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