26
possible with the Basel Accords: between the
summer of 2007 and March 2012, the liabili-
ties (the equity, part of which is the share capi-
tal, supplemented with borrowed capital such
as saving deposits and debts on the interbank
market) of the Belgian financial institutions
has gone down by 28.6%. For that same period
the hard basic equity (money that is available
immediately, for example when losses would
have to be accepted) increased by 19.3%. As a
result, the leverage of the Belgian financial in-
stitutions dropped from 31.9 to 18.3. Financial
institutions are therefore unmistakably more
solid than before the crisis.
Due to the decrease in leverage, the banks
also need less funding via the financial mar-
kets (wholesale funding). This is to the benefit
of their liquidity position: banks have more
money that is available to them immediately,
due to which they experience fewer problems
when they must fulfil various payment orders
in the short term. Whereas in 2009 fund-
ing by the financial markets still amounted
to €267 billion, this sum was reduced to 182
in 2011.
At the same time, the number of deposits is
increasing. Traditionally, Belgians have always
been savers. In the last few years, however,
the amount deposited in saving accounts has
increased spectacularly. In September 2012
there was a total of EUR 230.2 billion in Bel-
gian savings accounts. Compared with end
June 2007, this meant an increase of 54.7%.
This deposit acquisition enables the financial
institutions to provide cheaper loans and con-
tributes to the stability of the Belgian financial
institutions, in particular the savings banks.
Financial markets, after all, are much more
whimsical than savers. A larger share of sav-
ing deposits as compared to interbank debts
increases the health of the banking balance
sheets.
Future prospects
The challenge for the future will consist of rec-
onciling the lower risk profile and the smaller
scale of the Belgian financial sector with the
demand for loans, which may increase strong-
ly if the economy recovers. In this context, the
question may be raised if the efforts to achieve
banks that are as secure as possible and to
achieve as little as possible risk will not nip
economic growth in the bud (employment,
lending, etc.).
The fact, also, that the Belgian financial insti-
tutions had no choice but to withdraw more
within their national borders, could be a wor-
rying issue in the future. This process of bal-
kanisation or fragmentation of the European
market, after all, could complicate lending to
Belgian companies abroad.
Although the financial sector advocates the
new regulations (such as Basel III) that in-
crease the stability of the financial institutions
and of the entire financial system, it also ex-
presses its fear that the funding of long-term
loan and loans for relatively large transactions
and projects could become more difficult.
Within this changed financial landscape the
financial institutions with their new and more
restricted business models must neverthe-
less be able to continue generating sufficient
profitability. The return on equity (ROE) of
2.
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PROSPERITY