The interest rates Dutch banks are offering on savings are too low, and this is partly down to the lack of competition, competition watchdog ACM said on Tuesday.

Most Dutch savers are with ABN Amro, ING and Rabobank and few consumers are switching their savings to other banks that offer higher rates, the ACM’s research has found. As a result, the major banks “experience insufficient competitive pressure to increase their savings rates”. 

While the agency says it has not found any indications of illegal agreements between the major banks to keep rates low, “it is plausible that there may be ‘tacit coordination’ between the major banks”. 

This, the ACM said, means that banks keep an eye on each other’s interest rates and closely follow each other’s moves instead of competing with one another. The practice is not illegal but the effect is similar to that of a cartel, and, as such, hurts consumers, the ACM said. “Consumers get lower interest rates than they would have in a competitive market.”

According to comparison website Spaarrente.nl, the best interest rate currently on offer in the Netherlands is 4% on a savings account with Irish bank Trade Republic, followed by 3.65% from Spain’s Openbank. 

Rabobank is the first of the big three Dutch banks on the list, in 31st place, with an interest rate of 2%. The best rates offered by ABN Amro and ING are 1.5%. 

“The results of our research show that competition in the Dutch savings market is not functioning properly at the moment,” said ACM chairman Martijn Snoep.

The ACM has made several suggestions as to how it could be made easier for people to switch banks, and therefore boost competition in the savings market. 

While most people are happy with their current banks, a large group is unaware of the availability of other savings products offering higher rates. In addition, a large share of consumers prefer to use a Dutch bank and have little confidence in foreign operations. The complexity of switching savings products and tie-ins between savings and current accounts, also present a problem. 

Transparency

The ACM says that the banks must provide more transparent information and present current savings products in an easy-to-understand manner, using clear examples. Some banks only allow consumers to open a savings account in combination with a checking account – and this practice should be banned, the ACM suggests. 

It also says the government should create a mandatory switching service which will make it easier for consumers to move to a different bank.

The ACM was asked to investigate the Dutch savings market by the finance ministry following concerns that savings rates in the Netherlands are lagging behind European Central Bank rates.  

This preliminary report has now been put out for consultation and will be finalised later this year.