Last week, the Dutch Authority for Consumers & Markets (ACM), announced that it has launched a broad market study into the functioning of the Dutch savings market. The ACM is doing this in response to a request from the Ministry of Finance (Ministry), the specific reason being that the savings rates of the major Dutch banks lag behind the European Central Bank (ECB) rate.
Savings rates gap
For some time now, there has been a debate in the Netherlands about whether Dutch banks' savings rates are not rising fast enough, to the detriment of consumers. The ECB's increase in deposit rates, combined with the limited pass-through of savings rates, was addressed, among other things, in a letter from the Minister of Finance (Minister) to the House of Representatives dated 12 September 2023. In this letter, the Minister gives a number of possible explanations for this limited pass-through. One is that when banks raise savings rates, they have to pay a higher rates on almost all savings held with them, while on the other hand a large proportion of outstanding loans actually have a longer fixed interest period, which means that the interest income banks receive from them does not rise equally. Other explanations mentioned are that the extent to which the increase in the key ECB interest rate is reflected in savings (and other interest rates) is a commercial consideration for banks, which also takes into account the risks and increased costs due to inflation, and that savings rates generally do not rise or fall directly in line with the key ECB interest rates.
In addition to this, the Minister indicated in replies to questions from the House of Representatives that there is a lot of excess money in the banking sector as a result of the ECB policy over the past decade. There has also been a limited outflow of savings from banks, even though consumers can sometimes get higher returns if they were to switch. The incentive for banks to compete on savings rates to attract new savings is therefore limited, which is another explanation for the limited raise in savings rates.
Despite these statements, and also taking into account interventions by governments in other EU Member States, the Minister considers it important to explore in advance the pros and cons of various policy options in the event of a prolonged period of low savings rates. The Minister also saw reason to ask the ACM whether there was any reason to investigate the development of savings rates and competition in the Dutch savings market.
Factors influencing switching and offering higher savings rates
The ACM apparently sees reasons to conduct this investigation into the functioning of the savings market in the Netherlands and the factors that limit consumers from switching and prevent banks from offering higher savings rates. In the ACM's announcement of this market study, the ACM notes that there are providers (including international ones) that, at first glance, offer Dutch savers higher rates than the major banks in the Netherlands do, while consumers appear to switch to these banks only to a limited extent. These kind of general market studies are not rare as the ACM conducts these more frequently in various sectors. In this context, the ACM questions a wide range of parties. In this case, the ACM has at least mentioned the Netherlands Authority for the Financial Markets (Autoriteit Financiële Markten)) and the Dutch central bank (De Nederlandsche Bank). In addition, it can be assumed that the ACM will also question banks by means of requests for information.
The ACM's investigation is therefore not focused on alleged violations by banks of cartel prohibition in Article 6 of the Competition Act or Article 101 TFEU or other provisions of competition law. This does not exclude the possibility that, in the course of its general market investigation, the ACM may come across situations that could lead it to investigate further. However, in view of the explanations already given by the Minister for the lagging savings rate and possibly also in view of legal barriers to market entry, it is doubtful that such evidence will be found.
What is next?
The ACM's investigation will take several months. The ACM expects to publish its findings before the summer of 2024. Whether there will be any consequences from the results will of course depend on the conclusions. As is often the case with the ACM's market studies, it may also include recommendations, for example, for legislative intervention to promote competition if it is found that there is insufficient competition as a result of the current regulatory framework.
