Convention!
The most boring, but the most read, document I ever wrote was the Interest Rate Instruments and Market Conventions Guide. The document is more than 10 years old and requires a serious update.
One thing that does not require an update is the convention for money market deposit in EUR. The convention is as always ACT/360 simple interest. The official ECB rates are at 4.00%, which means that if you invest today for one year a notional of 100,000 EUR, you get an interest from 15 November 2023 (T+2) to 15 November 2024 equal to 4,066.67 EUR (2024 is a leap year).
If a bank wants to trick a retail customer, he can claim that you can get an interest of 4.0556% without telling you that he is using an ACT/365F convention. The amount is the same (up to the rounding) but it sounds a lot better. You will naturally tell me that this is too much of a misleading trick and that consumer protection agencies will see that immediately and remind the bank about transparency and fair advertisement. A difference of 5.6 basis points may not look at a lot, but remember the LIBOR “scandal” — which actually is only a scandal in the way the justice departments, governments, central banks and regulatory bodies conspired against the truth as described in Rigged — was in relation to “manipulation” of the order of magnitude of 0.1 basis point at best.
Apparently, this is not the case in Belgium. Belfius is quoting its term deposits in ACT/365 rates. Moreover it does not even indicate the convention, only the “rate” — without any indication on what it means — and the tenor.
As usual, I wrote to the FSMA (Financial Services Market Authority, in charge of consumer protection). I’m expecting their answer. Or more exactly, like in the previous cases I contacted them for financial “errors” in advertisement, I don’t expect any answer — beyond the “we forwarded your message to the relevant department" — and don’t expect any action from them.
Added 2023-11-27: After 13 days, I did receive an answer from the FSMA. It says
La FSMA a pour mission d’exercer certaines tâches de contrôle des banques, mais pas de jouer un rôle d’intermédiation si un consommateur formule une plainte au sujet d’une banque.
Not exactly what I would call an answer to the issue. I tell them there is a general transparency problem for consumers which is under their regulatory responsability and they answer that I should contact the bank responsible for the problem, not the regulator!
Added 2024-12-01: For information, here is how the term "interest rate" is defined in the Belfius "product information"
Taux d'intérêt: Le taux dépend de la durée déterminée choisie. Le taux est fixe pendant la durée du placement.
Not the most detailed definition in term of convention in my opinion.
This is not a Belfius specific issue. ING "defines" the rate as
Taux d'intérêt: Le taux s’exprime toujours sur une base annuelle et est fixe pour toute la durée du placement.
At least they indicate it is an annualized rate!
Added 2024-12-01: I explored the tools that the FSMA has created to help consumers to understand financial products. https://www.wikifin.be. There is a page related to term deposits: https://www.wikifin.be/fr/epargner-et-investir/produits-dinvestissement/produits-long-terme/quest-ce-quun-compte-terme
On that page, the term "rate" is not defined. But there is an example on how to compute the interest amount from the rate:
Exemple: Vous versez 5000 euros sur un compte à terme d’une durée de quatre mois, avec un intérêt annuel brut de 1,20% (taux d’intérêt fictif). À la fin des quatre mois, (1/3 d’année), vous ne toucherez que 0,40% (1/3 des 1,20% d’intérêt), moins 30% de précompte mobilier = 0,28% d’intérêt. Sur vos 5000 euros, cela donne 14 euros d'intérêt net.
It sounds like the FSMA thinks that interests on money market term deposits in EUR are paid with a ACT/ACT ICMA convention or something like that. Not a good start to regulate the money market! Remember that during the so-called EURIBOR manipulation, the FSMA was in charge of its supervision!
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