By Yoruk Bahceli
BRUSSELS (Reuters) - Belgium has raised a record 21.9 billion euros ($23.65 bln) from savers in a bond sale designed to compete with bank deposits, a sign of growing popularity for government debt as discontent grows with lenders failing to keep up with surging interest rates.
The sale, launched on Aug. 24, was aimed at pressuring banks to raise deposit rates. It marks the biggest funding drive from households in Belgium's history and is likely Europe's biggest retail bond sale, the country's debt agency said on Monday.
Equivalent to around 5% of Belgian deposits, it eclipses the 5.7 billion euros raised from savers at the height of the euro zone debt crisis in 2011 and beats the 18 billion euros Italy raised from savers earlier this year.
European lenders awash with cash have resisted raising savings rates while market interest rates have surged as central banks fight inflation, prompting withdrawals by households looking for better returns.
Bonds issued by governments targeted at savers have become a popular alternative. Italy and Portugal have this year shifted big slices of their funding programmes to households.
The scale of demand for the bond was "a clear signal for the banks," Belgian finance minister Vincent Van Peteghem told Reuters, adding he had never expected the sale to prove so popular.
"Savers are giving a signal to their banks to say: we are expecting a higher return than the one that you are offering nowadays on your savings accounts. We ask at least the same respect that you have for your shareholders," he said.
Belgium's one-year bond pays an interest rate of 3.3%, above the 2.5% and often much lower rates on savings accounts, according to aggregator website Spaargids.
Jean Deboutte, a director at the debt agency, said high demand led to its IT systems crashing several times during the sale.
"At one point in time we had one subscription per second." he said. "That's a figure one would find with Amazon."
Across Europe, governments are seeking ways to compensate households taking a blow from the surging cost of living while missing out on the benefit of rising interest rates.
Italy recently dealt a blow to banks with a one-off tax on their excess profits.
While demand for the bond is high, the country's biggest lenders are yet to raise rates paid on savings accounts.
"It is now up to every bank individually to see which impact this had on their bank," Belgian financial sector lobby Febelfin spokesperson Isabelle Marchand said.
"This will be different for every bank, but the financial stability of every bank needs to be monitored closely."
Noting that some institutions have raised rates or offered similar products since the bond sale, Van Peteghem said he hoped and expected bigger banks would now follow.
"If that's not happening that means that we still need to look for other tools. We can issue again another bond in December," he added.
The one-year maturity, shorter than Belgium's usual retail bonds, was designed to mirror savings accounts that increase the payout to savers if they lock up their money for a year.
The government has agreed a bill, pending approval, reducing the withholding tax buyers will pay to 15% to make the bond more attractive relative to savings accounts, from 30% on other Belgian retail bonds.
Marchand said Febelfin had no problem with a tax-friendly bond, but added: "the same conditions should apply to all similar investment products, and therefore there should be a level playing field."
Belgium's debt agency said the vast size of the bond sale meant outstanding short-term debt would be reduced by more than 10 billion euros over the course of 2023, longer-debt issuance cut by over 2 billion euros and the cash reserve position increased by around 9 bln euros.
($1 = 0.9260 euros)
(Reporting by Yoruk Bahceli and Bart Meijer; Editing by Sudip Kar-Gupta, Dhara Ranasinghe and Ed Osmond)