economie - pre-teaching: non-competitive markets

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