Banks and Government propose measures to address rising interest rates and loan disparities

An intensive discussion has recently broken out about the rising interest surpluses of the banks and the widening gap between loan and savings interest rates. In response, Brunner and Willi Cernko, chairman of the bank and insurance division in the Chamber of Commerce (WKO), proposed measures on Wednesday: no reminder fees and default interest should be charged for variable loans. In individual cases, deferrals or an extension of the terms should also be possible. This is a reaction to individual cases, according to Cernko.

Brunner also announced a platform at the Austrian National Bank (OeNB). You should bundle and publish the conditions of the money houses in the sense of transparency. In addition, the federal treasury is to be revived. Austria had discontinued this online savings product, which was then accessible via Bundesschatz.at, in view of the low interest rates in 2019.

Call for interest rate caps

The package presented on Wednesday was not met with enthusiasm everywhere. SPÖ finance spokesman Kai Jan Krainer called for an interest rate cap so that the loans can be repaid. “Particularly reprehensible” is Brunner’s behavior, “who does not want to do anything about the obvious market failure in the financial sector and the excessive profits of the banks. Relying on voluntariness has not worked to combat inflation and will not work when it comes to interest rates,” says Krainer.

The FPÖ could not gain anything from the measures either: “Unaffordable loan interest remains unaffected, there is no interest rate cap, no excess profit tax, no increase in the bank levy and no end to the ‘fake profit’ tax on savings interest,” said party leader Herbert Kickl and finance spokesman, according to the broadcast Hubert Fuchs. “So there is nothing for the savers, and the borrowers are begging the banks for interest on arrears and reminder fees.”

Brunner had already rejected calls for an interest rate cap in the morning, and it was not legally possible to implement one. “If we talk about interest rate caps, that is not possible under antitrust law and would lead to massive distortions on the financial markets,” he said, referring to Italy. There will also not be a special tax, one has seen that this is “not necessarily a good idea”. Italy had introduced a tax to skim off profits that the financial institutions bring in with the help of interest rate developments. As a result, the financial markets revolted, and the reform was subsequently adjusted in a number of points.

Institute refers to French model

NEOS took a differentiated view of the plans: It was their right for the banks to help the borrowers affected. “Because it is not the job of politicians to regulate every area of ​​life to death, just as little as tenants can use their tax money to take on the risk of homeowners with variable credit,” says business spokesman Gerald Loacker. However, non-wage labor costs would have to be reduced so that the population would have more money.

“As expected – disappointing” was the assessment of the Austrian Trade Union Confederation (ÖGB) on Wednesday. “The problem of high interest rates for overdrafts was not even addressed,” said ÖGB chief economist Helene Schuberth in a press release. Other countries have interest rate caps for loans, According to Schuberth, the transparency offensive is “the next announcement, but not a solution for historical record profits” by the banks. There is also already a comparison portal for savers.

The Momentum Institute, which is close to the Chamber of Labour, again referred to the French model and demanded something similar for Austria: According to this, savers in France currently receive three or six percent interest on savings deposits, depending on their income, whereby this is determined by the state. The interest rates would be adjusted annually – if necessary also during the year. On the other hand, deposits in an average Austrian savings account currently yield 0.95 percent interest.

Industry and economy pleased

Positive reactions came on Wednesday from the Austrian Chamber of Commerce (WKO) and the Federation of Austrian Industry (IV). The package then provides a helping hand, “if and where it is really necessary,” according to WKO Secretary General Karlheinz Kopf. “This means that the populist game played by individual politicians at the expense of an entire industry must come to an end.”

“The currently proposed short-term and sometimes populist interventions in the banking sector are not effective and are damaging the investment climate,” said IV Secretary General Christoph Neumayer. “The proposals for transparency in the interest rates on savings deposits will ensure that every citizen can invest their money with the best interest rate,” said Neumayer.

Financial knowledge required

The former Erste Bank boss Andreas Treichl brought up another aspect in the Ö1 morning journal on Wednesday: the lack of financial knowledge in Austria. You have to help borrowers in need, “then you have to find reasonable solutions for the future. And unfortunately I can only say it again: A very, very important aspect is that we are really doing a lot in the direction of financial education in Austria,” says Treichl. In this way, serious wrong decisions – such as loan agreements that are too risky or unsuitable – can be avoided.

The legal protection platform Cobin Claims also saw incorrect advice that could cost borrowers dearly. She referred to foreign loans that could cause problems. According to Chairman Oliver Jaindl, there are currently around 45,000 outstanding Swiss franc loans. Politicians should ensure a moratorium here to prevent emergencies and foreclosures.

SAAM for hardship funds

The consumer protection association (VSV) also criticized the foreign currency loans and called for the statute of limitations for incorrect advice to be extended from three to 30 years, as well as a support fund for lawsuits and a hardship fund, as well as the implementation of the EU directive for class action lawsuits in order to be able to help those affected more easily. According to VSV chief lawyer Peter Kolba, the fact that banks forced loans on customers during the low-interest phase is only half the truth. Many house builders are still suffering today from “the unfortunate constructions of final foreign currency loans and repayment vehicles from times before the financial crisis, which were sold like hot cakes driven by commissions”.