Since the subprime crisis of 2008 and the resounding bankruptcy of the American investment bank Lehman Brothers, which left a lasting impression, the banking world has been experiencing a severe crisis. This mistrust has not only settled in the relationships between retail clients and banks but also between banking institutions and their own regulatory authorities.

Thus, while European legislators deemed it wise to raise the deposit protection limits from €20,000 to €100,000 to reassure savers, regulatory authorities continuously encourage banks to strengthen their capital reserves and pass stress tests.

Furthermore, Europe is attempting to establish a broader banking union that would increase solidarity among banking institutions in times of difficulty.

The survey results

A study conducted between July and October 2013 by the firm Ernst & Young shows that more than one in two customers does not have complete trust in their main bank, a trend more pronounced in Europe than in the rest of the world.

According to this study conducted in 43 countries, 44% of customers claim to have “complete trust” in their main bank, a proportion that drops to 32% for European customers.

In France, 9% of respondents claim to have very limited trust in their bank, a proportion that affects 33% of Irish customers and 17% of Spanish customers.

Thus, while 40% of customers worldwide would recommend their main bank, this figure drops to 29% in Europe.

Why such dissatisfaction?

Numerous recent cases and scandals have tarnished the public’s trust in banks.

We are, of course, thinking of the J. Kerviel case, which cost Société Générale nearly 5 billion euros following dubious positions; the B. Madoff case, sentenced to 150 years in prison for a fraud involving nearly 65 billion US dollars; the recent LIBOR manipulations carried out by major banking institutions both in the City and on Wall Street. Just look at the latest film by M. Scorsese, “The Wolf of Wall Street” featuring Leonardo DiCaprio among other stars, to realize how catastrophic the public’s image of the banking world is. In this film, the viewer discovers brokers who truly have no knowledge (nor scruples) about the financial products they offer their clients.

Without delving into these “extraordinary” cases, the survey reveals that nearly a third of clients reported an issue with their bank in the past 12 months, and among them, 33% were dissatisfied with the resolution. A third of the very dissatisfied clients declared their intention to close all or part of their accounts.

Specific complaints in private banking

It is no secret that private bankers, those assigned to the discretionary management of securities portfolios, receive specific instructions from their employers to sell financial products developed by their banks. They even receive specific commissions (bonuses) if they succeed in selling these products to their clients.

Is it necessary to specify whether these products are good or bad (e.g., a bank offering you a life insurance product developed in-house)? Needless to say, there is strong pressure on small clients to buy products on the condition that they also subscribe to some “in-house” products. The banker will tell you that these are excellent products and that the management cost is reduced to zero because they are “in-house” products.

We have only one piece of advice for you: resist and compare! Only buy financial products that you are convinced meet your desires and your investor profile. Follow through with your ideas. Also compare with products from other banks.

Does your banker not want to follow your desires? Change banks. You will see that suddenly, they will view things differently.

How to choose your bank?

Our website is full of smart advice to support all your life projects, and choosing a trustworthy banker is certainly part of that. So take the time to read our advice article on choosing the right bank.

CPE is not a bank but a credit intermediary

Our company is not a bank but a credit intermediary.

Our mission is to help you obtain a personal loan or a mortgage from a banking institution.

To do this, we help you prepare your file to increase your chances of obtaining the credit you want.

Why not contact the bank directly?

There are several reasons for this:

• Banks delegate their retail activity to credit intermediaries like CPE;
• Banks only manage professional or very large credit requests;
• A credit intermediary ensures the diversity and competition that a bank cannot offer you;
• A credit intermediary can get you a decision within 48 hours, which will never happen with your banker.

Inflation is the devaluation of money caused by what is known as the price and wage spiral. This spiral corresponds to the constant increase in prices and wages through mutual influence. It is measured using the consumer price index.

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In other words:

Inflation is a general and sustained increase in the prices of goods and services. This situation corresponds to a decrease in the purchasing power of money. In short, for the same amount of money, you can buy less than before.

The causes of inflation

Increase in the money supply:

This is monetary credit inflation, which is an excessive increase in the money supply, causing prices to rise because the value of money decreases.

Supply and demand:

With the impact of the health crisis and lockdown, people have changed their lifestyles and needs. Companies struggle to meet consumer demand, which is why stocks have decreased, making some products rarer and therefore more expensive.

Increase in costs:

The increase in costs concerns the rise in the price of imported raw materials or finished products, and production costs. This is known as cost-push inflation.

Why does inflation impact us?

According to the European Commission’s report, the EU economy is expected to grow by 4.0% and 2.8% in 2022 and 2023, respectively, after significant growth of 5.3% in 2021. Growth in the euro area is also expected to reach 4.0% in 2022, before falling back to 2.7% in 2023. The EU’s GDP returned to pre-pandemic levels in the third quarter of 2021, and each member state is expected to reach this level by the end of 2022.

These new forecasts take into account government measures such as setting a maximum price for gas and electricity.

Indeed, it is the prices of energy, oil, and raw materials that have been driving the consumer price index upwards for months. As a result, the authorities in several European countries, such as Belgium and France, have developed price control mechanisms to limit the impact of inflation on consumers’ purchasing power.

However, despite savings measures, wages will increase, thanks to the index mechanism. This increase will vary from 2% to 3.17% depending on the sector.

According to the latest figures, the consumer price index increased by 3.2% annually in March, recording its highest growth rate in fifteen years.

Is inflation good news for my loan?

At first glance, this is rather bad news for consumers. However, one category can undoubtedly benefit: fixed-rate loan borrowers. Indeed, for those who have taken out a fixed-rate loan (with a fixed monthly payment), under the impact of inflation and provided their salary increases, the weight of the repayment installment will decrease. However, be careful to put this beneficial impact into perspective for households: first, inflation will result in a short-term loss of purchasing power, and the favorable effect will only exist if salaries increase.

Furthermore, the lasting nature of this inflation is also important for the effects to be noticeable. While the ECB continues to prioritize combating inflation.

For example, for a monthly payment of €990 granted with a salary of €3,000, if inflation continues at an annual rate of 3% over 3 years and the salary increases at the same rate, the borrower will repay €990 with a salary of €3,278, resulting in debt that would drop from 33% to 30%. This consolation is rather small. It is better to remember that the return of inflation acts as a redistribution of wealth. Since it impoverishes savers to enrich borrowers.

Finally, austerity policies within the EEA must be taken into account. Indeed, we know that if the German trade balance deficit is better than that of its neighbors, it is because in Germany, wages increase more slowly than inflation. Thus, we are no longer in a quasi-closed economy as in the 1970s. Our openness to the world risks slowing down wage growth, possibly falling well below inflation, to increase the competitiveness of countries with each other.

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In conclusion

Much ink has been spilled on this subject recently. Some right-wing parties are talking about the need to reduce the wage increase ratio compared to inflation, as in Germany. This position seems to be a real casus belli for all left-wing parties in Europe.

Finally, it remains to be seen whether, in the face of the realities of the opening of the global economy and the extraordinary competitiveness in Asia, European countries will not be forced to touch the rule of wage indexation in the face of inflation.

Is this another sign of the crisis? The number of over-indebted people reached a record 324,063 in September 2012. The percentage of defaulting borrowers is now 5.2%. This means that out of 100 loans granted, credit institutions record a 5.2% default rate. This leads the said institution to report the credit to the National Bank of Belgium.

Evolution of the number of over-indebtedness cases

This number, in truth, changes little. Indeed, if there are more over-indebted citizens, it is also because there are more credit contracts registered.

The proportion of defaulting credit contracts has remained stable. However, the average amount of unpaid debt has increased by 2,000 euros in 5 years. In 2007, when a Belgian had a debt, it averaged around 6,000 euros. This figure has risen to 8,000 euros today.

The situation varies by region. Payment defaults affect 8.1% of Brussels borrowers, 6.9% in Wallonia, and 3.5% in Flanders. While the percentage of over-indebted borrowers is lower in Flanders, the amount of their payment arrears is higher. It averages 9,500 euros.

The total amount of overdue repayments has increased in one year from 2.615 billion euros to 2.645 billion euros.

The profile of over-indebted people is very specific. Half of them are between 25 and 44 years old. Moreover, one in two lives in a household that earns no more than 1,250 euros per month.

The consequences of a payment default

Initially, the credit institution has the legal obligation to report the credit contract to the National Bank of Belgium. What does this mean? As soon as you have accumulated three unpaid monthly payments, the bank is required to notify you by registered letter and proceed with your registration with the National Bank of Belgium.

Direct consequence: you can no longer obtain credit in Belgium as long as you have not fully settled the amount of unpaid debts, including late interest and any penalties for reporting the credit contract. Then, the law requires you to wait another 15 months before you can borrow again in Belgium.

Furthermore, if the default concerns a mortgage, the consequences can be dramatic. The bank will, in addition to the registration, proceed with the foreclosure of the house and it can be sold at a public auction (exactly as happened in the United States or Spain following the recent real estate crises).

Sometimes, the borrower will have the unpleasant surprise of finding that despite the sale of the house, their debt remains very high because the default occurred in the early years, and the borrower has paid much more interest than principal…

Our prevention policy

At European Popular Credit, we have implemented a prevention policy to avoid payment defaults and we inform our clients about mortgage loans to best protect their interests.

Regarding personal loans, our brokers study and analyze the files of potential borrowers thoroughly. We respect a debt ratio that does not exceed 40% of income. We discuss with our clients the amounts requested, the desired durations, and the purpose of the funds. Sometimes it is better to receive a little less money, be more reasonable, but be sure to repay your loan. This is the essential advisory mission of our brokers.

In terms of mortgage loans, we practice absolute transparency. Some institutions sell borrowers very low interest rates. The downside is that the borrower repays much more interest than principal and in case of default in the first 10 to 15 years of the loan contract, it is a disaster.

We advise you to repay more principal than interest, even if it means paying a slightly higher monthly payment. The two advantages of this solution: we force you to become aware of your contributory capacity and you repay the principal much faster than the interest. In the end, the total cost of your loan is obviously lower, which is in your interest.