Big Belgian Loan

“A breath of fresh air for the real economy.”

Just when hope was running out, the green light comes on. As of November of this year, banks will be able to offer “themed consumer loans” also known as “popular loans.”

On Wednesday, the latest restricted ministerial council approved the draft of this law that will be finalized this week. Prime minister Elio Di Rupo had announced that the draft would be finalized before summer. He had been, however, politically blocked for several months because the VLD liberal Flemish had tied the green light to an agreement on competitiveness.

Finally, on Tuesday evening, the political give and take was abandoned. The bills were unlinked. The consumer loan can now take flight.

What is this consumer loan? It is simply a type of bank certificate or term account offered to savings customers.

They will go to finance specific projects grouped by certain special terms and must have duration of at least five years.

Fiscal terms: Withholding taxes on interest will not be the normal rate of 25%, but will be at 15%. Certificate terms: The holder will not be able to cash it in.

These deposits come with the same guarantee of up to €100,000 per customer per bank, just like other banking deposits.

And how will this money be used? “It will go to specific large scale projects such as building new schools and retirement homes, and also for SMEs,” recaps the minister of economy Johan Vande Lanotte.

“Using these themed consumer loans, we want to encourage customers to enter a safe and advantageous system while contributing to investments in projects that will breathe new life into the real economy.” adds the minister of finance Koen Geens.

A decree will further delineate which types of projects can be financed by these means.

Why help banks find long-term deposits? The banks don’t think that there is a credit crisis. They point out that the outstanding loan balance to companies are at a record €120 billion.

“SMEs, companies, not-for-profit organizations have the most difficulty obtaining credit from banks,” the government responds. There are several reasons for this. First, the banks have become stricter due to the financial crisis.

Also, the new regulations ensure that banks line up the term of credits that it offers to match more closely that of the instruments it uses to finance itself. A dramatic example: a seven-year term loan given to a community to renovate a stadium should be financed ideally for seven years.

The crisis and weak interest rates were not encouraging investors or savings customers to loan money over the long term, especially in banking, a risky sector.

Savings are then more likely to go into the kinds of accounts that have attracted record sums. The balance of regulated savings accounts surpassed €243 billion at last count.

How much will be harvested? No one knows yet. Success will depend mostly on the rate the banks can offer at this time. These rates will be set by decrees, but should not vary much from terms offered with regular bank certificates.

Currently, they yield about 2% over 5 years. According to our colleagues at the Tijd, the government has calculated that the fiscal cost of this measure should reach €4.5 million this year and €9 million next year. The expected yield should be a little over €2.2 billion this year and €4.5 billion next year.

“But at this time, any estimate would be premature,” qualify both Johan Vande Lanotte and Koen Geens.

PIERRE-HENRI THOMAS

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