The Dutch savings market has been a topic of concern for the Dutch Minister of Finance due to the low savings rates compared to the European Central Bank's (“ECB”) policy rate. In 2023, the Netherlands Authority for Consumers & Markets (“ACM”) started a market study to examine the relationship between the lack of competition in the Dutch savings market and the low savings rates. The ACM’s investigation revealed that the market is highly concentrated, with a few major banks holding the majority of the savings market, resulting in an oligopolistic market that is not functioning well. Despite alternative banks offering higher rates, consumers are not switching, reducing competition and exerting minimal pressure on the major banks to raise their savings rates. The ACM published its report on 28 May 2024, causing commotion in the Netherlands as the ACM indicated in its report that there are signs of ‘tacit collusion’ among the major banks in the Netherlands. Also, the ACM seized the outcome to support its ongoing policy plea for a New Competition Tool to address market failures like that in the savings market outside the realm of the traditional competition rules.

Results of the investigation 

The findings of the ACM in the market study indicate that the Dutch savings market is an oligopolistic market that is not functioning well, resulting in low savings rates for Dutch consumers. The market is highly concentrated, with a few major banks holding the majority of the savings market. Despite alternative banks offering higher rates, consumers are not switching, thus reducing competition and exerting minimal pressure on the major banks to raise their savings rates. This concentration of market power and lack of competition thus results in the major banks feeling minimal pressure to raise their savings rates.

According to the ACM it is likely that there is tacit collusion between the three major banks in the Dutch savings market. This form of unintentional coordination is not a violation of competition rules, (we will address this further below), but it results in suboptimal market outcomes. Certain market characteristics, such as high transparency, product homogeneity, and symmetry between major banks, contribute to the risk of tacit coordination. Banks can easily align their decisions on savings rates without explicitly making agreements. The parallel movements of savings rates among major banks further suggest the existence of tacit coordination.

Over the past few years, the ECB has implemented an expansive monetary policy. This has resulted in banks having a more substantial liquidity position and easier access to financing from the ECB. As a result, banks have become more resilient to outflows of savings and have had less need for savings as a source of funding. Along with the growth of the total volume of savings, this has further weakened competition and led banks to offer lower savings rates. The increase in liquidity has also contributed to historically high bank profits. 

Furthermore, some customers face barriers to switching to another bank provider. For instance, some banks require a minimum balance to be maintained in savings accounts, making it difficult for customers to switch to another bank with a better rate. Moreover, the lack of transparency in the savings market makes it hard for customers to compare rates offered by different banks. This lack of transparency also makes it challenging for new entrants to gain a foothold in the market, as they do not have the same level of brand recognition as the major banks. While there may be other explanations for the lower savings rates, such as the recovery of margins, rising operational costs, and maturity transformation, the ACM considers insufficient competition among the major banks to be the primary cause of the lower savings rates.

Recommendations 

To improve competition in the savings market in the Netherlands and provide customers with more options and opportunities to find the best rates and terms for their savings accounts, the ACM has made several recommendations, directed towards the legislature. These recommendations focus on reducing barriers to switching banks, increasing transparency, promoting innovation, and enhancing consumer protection. Out of the ACM’s 11 recommendations, the main ones are as follows: 

1. Implement IBAN number portability, which would allow customers to switch banks without having to change their account number. This would make it easier and less costly for customers to switch banks.
2. Increase transparency in banks' information provision. Consumers are not sufficiently aware of the available options in the savings market. A solution would be to improve the information provision from banks and comparison websites to consumers. For example, by requiring annual communication about the structure of the savings interest and obligations to present current savings products in an understandable way, with clear calculation examples.
3. Prohibit the tying of sales of payment and savings products, ensuring that customers can open a full savings account at any bank without having to open a regular account.
4. Create a mandatory ‘bank switching service’ for or customers who want to open a savings account elsewhere. This would enable customers to easily indicate how much money they want to transfer, with the old and new banks arranging it between themselves.
5. Advocate for the development and obligation of standards for data portability and interoperability for payment and savings accounts at the European level. Customers should be able to take their transaction history with them when they switch to a new bank.

Aftermath market investigation 

The report by the ACM on the Dutch savings market caused a stir when it was released on 28 May 2024. Despite there being over 20 banks with a Dutch license operating in the savings market, many savers have accounts with the three big banks, whose combined market share remained stable over the years. As consumers are reluctant to switch to smaller banks offering higher rates, the big banks feel little pressure to raise their interest rates, resulting in a lack of competition. The report also suggests that there is "tacit collusion" between the three big banks, where they avoid competition with each other without any explicit communication. The Chief Economist of the ACM. Paul de Bijl, felt the urge to publish his view on the report and in particular addressed the topic of ‘tacit coordination’.

In his blogpost, the Chief Economist of the ACM explained what the ACM meant by tacit collusion, namely a situation where companies compete by avoiding each other, rather than trying to outdo one another. This can be achieved by not undercutting each other's prices or making it difficult for each other to gain market share. Such agreements are prohibited by competition laws. However, it is not always necessary for companies to make explicit agreements. Competitors can understand that they will benefit from avoiding competition, especially in the long term. This is known as tacit collusion. It refers to 'parallel behaviour' without any explicit coordination, where competitors monitor each other's behaviour and respond accordingly, leading to a stable situation like a cartel.

The Chief Economist explained further that economists tend to be cautious about qualifying market outcomes as tacit collusion because it involves various required assumptions. Furthermore, unlike evidence of a cartel, tacit collusion is difficult to proof but it can be made plausible by analysing market conditions and eliminating alternative explanations as to the reason the market is not functioning. 

In this case, the three major banks can keep a close eye on each other in a transparent market, prefer not to compete on prices, and are reluctant to be the first to raise savings rates. The report of the ACM into the functioning of the Dutch savings market tried to understand the causes behind the lack of competition on that market. According to the Chief Economist, the savings market exhibits favourable circumstances for tacit collusion, alongside other factors.

Conclusion

The conclusion of the ACM’s study into the functioning of the Dutch savings market is clear. The Dutch savings market needs improvement to ensure that customers receive fair and competitive savings rates. By increasing competition and removing barriers to switching, banks can better serve their customers and contribute to a healthier market. The ACM made some very specific recommendations, and it is up to the legislator to decide further. 

At the same time the ACM made it very clear that the Dutch savings market is not functioning because of the lack of competition, barriers to switching and the likelihood of tacit collusion among the big three banks in the Netherlands. This created for the ACM the perfect opportunity to intensify its lobby for the ‘New Competition Tool’. 

The ACM stated in its press release that it currently does not have powers to take measures to boost competition on the Dutch savings market. That is something the legislature must do. In several other countries, the national competition authority can impose measures in such situations to boost competition, for example, measures that help consumers get more information and switch banks. With additional powers (the New Competition Tool), ACM will be able to act against inadequate competition, but the legislator is hesitant and still investigating if this NCT would be a necessary and proportionate addition to the ACM’s already broad array of competences. 

For more information or further guidance in this area, please contact Pauline Kuipers or Reshmi Rampersad. 

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