How are savings interest rates calculated?

When you save money with a bank, you will usually earn savings interest. Savings interest is the return you receive on the money held in your savings account. We pay this interest because we use savings deposits to help fund lending to other customers. Customers who borrow money from us pay interest on their loans. In exceptional circumstances, savings interest rates may be close to zero or even negative.

Like other banks, we determine our savings interest rates based on a number of factors, including:

• Interest rates in the money and capital markets
• Costs, investments and profitability
• The amount of funding needed to provide loans
• Customers’ saving behaviour
• Competitors’ savings rates

Below, we explain each of these factors in more detail.

As explained above, we use savings deposits to provide lending to other customers. We also borrow money ourselves in the money and capital markets, for example from other banks or large institutions such as governments and pension funds. The interest rates we pay on these funds influence the savings rates we offer to our customers.

Savings interest rates are generally lower than the rates charged on lending products such as mortgages and overdrafts. This difference helps cover the costs of providing our services. Examples include staff costs and the development of new products and services for our customers.

We also invest in maintaining and improving our systems, including significant investments in security to help keep our customers’ money safe. In addition, we incur costs for services such as the ABN AMRO app, Internet Banking and Tikkie.

Another example is the contribution we make to the Dutch Deposit Guarantee Scheme. This scheme protects customers’ eligible deposits if a bank licensed by De Nederlandsche Bank becomes insolvent. Protection applies up to a maximum of €100,000 per customer.

Like any commercial organisation, we also aim to generate a return from the services we provide. This helps us maintain a healthy and resilient bank and continue serving our customers over the long term. For this reason, we may decide to increase, decrease or maintain our savings interest rates.

If customer savings are not sufficient to meet demand for mortgages and other loans, we need to raise additional funding. We can do this by borrowing in the capital markets. We may also attract additional savings deposits by increasing our savings rates.

Further down this article, we explain in more detail why mortgage rates and savings rates differ.

This refers to how much customers save with us and which savings products they use. When savings are typically held for longer periods, we can use those funds to support longer-term lending. Deposits that are frequently withdrawn are less suitable for this purpose.

We may therefore adjust the interest rates on one or more savings products to maintain a balanced mix between instant-access savings and deposits that are typically held for longer.

Savings rates vary between banks because of competition. If our savings rates are lower than those offered by competitors, customers may be more inclined to switch to another provider. If our rates are higher, however, we may attract more deposits.

If inflows of savings exceed the amount we can lend, this may be a reason to lower our savings rates.

Interest rates and balance classes may differ between customer groups. This is because the factors described may be different for different customer groups. Variations may be driven by differences in competition, saving behaviour and deposit volumes.

For example, Private Banking clients may receive different rates from retail or business banking customers. Interest rate differences between customer groups may also change over time.

When savings deposits are used to fund mortgages, the money is typically lent for a longer period. At the same time, customers expect to be able to access the money in their savings accounts whenever they need it.

This means we must always keep a portion of funds readily available. As these funds cannot be lent out, they generate a lower return.

In addition, there is always a risk that money lent to customers is not repaid in full, for example in the event of insolvency. This creates additional costs and risks. Part of the difference between lending rates and savings rates helps cover these costs.