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what is a government bond?
investment product issued by the government in order to finance its debt (debt certificate with fixed interest)
what does gross interest mean?
interest before taxes
what does net interest mean
interest after taxes
what does movable withholding tax mean?
tax on investments products
what does loyalty premium mean?
extra/additional interest if the capital stays in the account for at least 1 year
why is the government launching a 1-year government bond?
to create a competitive investment product and motivate the commercial banks to raise their interest rates
why, according to the Belgian government, is the interest rate on savings accounts too low?
basic reason = interest rates of ECB are still historically low
competition between commercial banks in Belgium is too low
what are the 4 major banks in our country?
KBC
BNP Paribas Fortis
ING
Belfius
what do we call the market form in which Belgian banks operate?
an oligopoly
atomism
1 supplier can not control the market price (+++suppliers)
homogeneity
there’s no difference in quality between products (no preference by the customer)
transparency
every market player has full acces to product information
mobility
there are no entry barriers for new suppliers
net interest on a government bond =
gross interest - movable withholding tax
interest on a savings account =
basic interest + loyalty premium
