Foreign financial transactions of Belgian non-financial sectors

The open character of the Belgian economy is also reflected in its financial relations with other countries. At the end of 2007, Belgium’s net foreign assets totalled around 44.4 p.c. of GDP. In the past decade, Belgium’s net financial assets have shown a marked increase, against the backdrop of the introduction of the common currency and the progressive financial integration and globalisation. The degree to which the various non-financial sectors have responded to these developments varies greatly between sectors. The public sector is the one which has done most to adjust its financing and seen the biggest rise in the share of the rest of the world in its total debt, namely from 20 p.c. at the end of 1997 to around 46 p.c. at the end of 2007. When the euro was introduced on the financial markets, it was imperative for the Treasury to widen its investment base : appropriate diversification of the corps of Primary Dealers and Recognised Dealers was one of the ways in which it achieved that. Non-financial corporations, which traditionally maintain very close international financial contacts, still saw a steady increase in the share of the rest of the world in their financial transactions between 1997 and 2007 : during that period, in the case of financial liabilities, the figure was up from 24 p.c. at the end of 1997 to over 37 p.c. at the end of 2007 ; for financial assets, the share was up from 28 p.c. to 39 p.c. However, these orders of magnitude are subject to a strong upward influence exerted by the coordination centres based in Belgium, which perform the function of a financial intermediary for the multinational group to which they are attached. In the past decade, there have been frequent exchanges of shareholdings between Belgian and foreign companies, reflecting the process of mergers and acquisitions, and these have also contributed to the growth of direct investment between Belgium and the rest of the world. Another point worth mentioning is that the past decade has brought a strong rise in loans granted by foreign financial institutions as a percentage of total bank lending to Belgian firms : that figure increased from 12 p.c. at the end of 1997 to 35 p.c. at the end of 2007. The share of foreign assets in the household portfolio dropped from 30 p.c. at the end of 1997 to 17 p.c. at the end of 2007. Naturally, that is due partly to the introduction on 1 July 2005 of the European directive on the taxation of savings ; it has now ceased to be possible for individuals to avoid the tax on income from interest-bearing assets held in other countries, and that has ultimately led to the repatriation of those assets. In contrast, in the case of non interest-bearing assets, foreign investment flows increased between 1997 and 2007. Finally, it should be pointed out that the share of the rest of the world in the liabilities of households is still negligible.flow of funds, financial flow

The impact of low interest rates on household financial behaviour

For the greater part of 2010, short-term and long-term interest rates in Belgium were at exceptionally low levels. Nominal interest rates reached historic lows ; in real terms, only the low point of 1974 remained unequalled. The yield curve was in turn relatively steep. In the first place, the question of whether these low interest rates have an impact on the overall financial transactions of households is examined. During the recent period, interest rates in real terms have only had a limited influence on the overall volume of savings of Belgian households. It seems that the increased savings behaviour of households and the associated accumulation of net financial assets during the period 2009-2010 can largely be attributed to economic uncertainty due to the financial crisis. But it can certainly be assumed that interest rates play some part in the selection of savings and investment vehicles by households. This is the case when they have to choose between short-term and long-term vehicles : long-term investments benefit from a clear preference in periods of high long-term interest rates or when the interest rate cycle has moved into a downward phase. During the few periods with a flat or inverted yield curve, private individuals reduce their short-term deposits since they then possibly expect a fall in long-term yields. It is primarily in the choices between short-term savings vehicles that interest rates have the greatest influence, as witnessed by the persistent switching between term and regulated savings deposits, where the recent fall in short-term interest rates worked strongly in favour of the latter vehicle. The build-up of claims on technical reserves of life insurance companies and pension funds is being stimulated by the current level of interest rates, since certain existing contracts offer a guaranteed return that is higher than the current market rates. Lastly, interest rates have some influence on the commitments entered into by households, and in the first place mortgage loans. It is primarily the number of mortgages that strongly grows in the case of low interest rates. Alongside this, low interest rates may prompt price rises on the housing market with a resulting higher level of recourse to mortgage lending. But lending does not entirely follow the trend in housing prices, partly due to a more restrictive lending policy on the part of the banks.saving, interest rates, credit, portfolio choice

The determinants of savings in the third pension pillar

The paper analyses participation in and contributions to the third pillar of the pension system by Belgian households. This pillar represents individual saving for retirement and has been growing rapidly. A detailed dataset of tax declarations over the period from 1993 until 2003 was used to analyse the possible determinants of saving in the third pillar. Firstly, this dataset makes an analysis from a macroeconomic point of view possible, showing an apparent increase in total contributions to the third pillar by 39 p.c. in real terms between 1993 and 2003. This increase is mainly due to a rise in the participation rate (29 p.c. in 1993 and 40 p.c. in 2003). A detailed analysis is provided across the age groups, which further shows the influence of the demographic evolution, the average income of the participants in the third pillar and the contribution rate. The dataset also helps point up a wide number of possible microeconomic determinants of saving for retirement, such as age, income, professional status, civil status, region of residence, property ownership, employment situation, participation in second pillar pension schemes, number of dependents, etc. Moreover, the database allows a distinction to be made between the two forms in the third pillar : pension saving and life insurance. From such a microeconomic point of view, the analysis sheds some light on the major determinants of participation to the third pillar. The main findings show that older households are more likely to opt for a third pillar pension scheme. Furthermore, it appears that households consider the two forms of the third pillar as being complementary rather than substitutes for each other : households that participate in pension saving schemes are also more likely to take out life insurance and vice versa. Besides age, the other determinants that have a positive impact on participation in the third pillar of the pension system are : having higher income, being self-employed, getting an early retirement pension, being a home owner, being married and living in Flanders rather than Brussels or Wallonia.personal finance, pension fund, life insurance, private pensions

Participative Leadership and Organizational Identification in SMEs in the MENA Region: Testing the Roles of CSR Perceptions and Pride in Membership

The aim of this research is to explore the process linking participative leadership to organizational identification. The study examines the relationship between participative leadership and internal CSR perceptions of employees and also investigates the role that pride in membership plays in the affiliation of CSR perceptions with organizational identification. By studying these relationships, the paper aspires to contemplate new presumed mediators in the association of participative leadership with organizational identification as well as determine a possible novel antecedent of employee CSR perceptions. Empirical evidence is provided from data that was collected through a survey distributed to employees working for small- and medium-sized enterprises in three countries in the Middle East and North Africa regions, particularly the United Arab Emirates, Lebanon, and Tunisia. Findings show that participative leadership leads to positive internal CSR perceptions of employees and that these CSR perceptions lead to pride in membership which, in turn, results in organizational identification. Implications of these findings are also discussed

Saving for retirement in the third pillar of the Belgian pension system

status: publishe