Featured Product

    NBB Examines Stability and Resilience of Financial Sector Amid Crisis

    July 01, 2020

    NBB published the financial stability report, with macro-prudential policy being one of the key focus areas in the context of the wide set of economic and financial policies adopted amid the COVID-19 crisis. The report highlights that COVID-19 pandemic posed challenges to the financial sector and financial stability; however, the Belgian financial system has solid capital and liquidity buffers and can, thus, play a key role in cushioning the impact of the crisis on households and businesses. NBB, as a supervisor, calls on financial institutions to continue to support the real economy, if necessary, by using the built-up capital and liquidity buffers.

    The report discusses the macro-prudential policy in Belgium, examines the financial stability of banking and insurance sectors, and contains a couple of thematic articles on the residential and commercial real estate market and the climate-change-related transition risks associated with real estate exposures in the Belgian financial sector. In terms of the forward-looking guidance on macro-prudential aspects, NBB emphasizes that, taking into account the latest scenarios and prospects, the deactivation of the countercyclical capital buffer, which was announced in March 2020, is likely to be extended until at least mid-2021. NBB is closely monitoring developments on the Belgian real estate and credit markets and it stands ready to release the macro-prudential capital buffers for real estate risks if, for example, those risks should materialist and lead to a substantial increase in non-performing loans. Supervisory expectations on mortgage credit also remain applicable. Although the macro-prudential buffers for systemically important institutions (the so-called O-SII buffers) are primarily structural, a release of such buffers is in principle possible.

    NBB highlights the importance of financial sector continuing to play its role as a financial intermediary and actively contributing to cushioning the impact of the crisis and supporting the real economy. In this context, NBB makes a number of recommendations to the financial sector, particularly the credit institutions:

    • The first recommendation aims to encourage maximum responsible use of micro- and macro-prudential buffers to support the real economy. The use of such buffers by individual banks is justified from a macro-prudential point of view and supports the real economy by avoiding pro-cyclical credit crunches. Individual banks’ reluctance to use these buffers—for example, on the grounds of stigma effects or as a precaution for possible future solvency issues—may be counterproductive in the context of this crisis and may substantially increase the impact of the crisis on the real economy.
    • Against the backdrop of unprecedented micro- and macro-prudential easing as well as significant uncertainty as to financial institutions’ future profitability, NBB, as the macro-prudential authority, also recommends that the financial sector should temporarily exercise the necessary restraint with regard to current and future dividend payout policies (and similar operations) or in the allocation of variable remuneration for senior staff; the sector should refrain from making dividend payments or similar operations at least until the beginning of October 2020. Regarding credit institutions, this recommendation applies to all banks active in Belgium and to dividend payments and/or transfers or similar transactions within international banking groups by systemically important subsidiaries active in Belgium.
    • In addition to the necessary focus on the short-term implications of the COVID-19 crisis, the financial sector should continue to pay attention to major longer-term structural challenges. For example, the persisting low interest rate environment remains a major structural challenge for the profitability of banks and a reassessment of the viability of certain business models is needed. In addition, the transition to a more sustainable and digitized economy will gain more traction. It is very important not only to exploit the opportunities of such transitions but also to closely monitor and mitigate the inherent risks that such structural transitions necessarily entail, also in terms of financial stability.

     

    Related Links

    Keywords: Europe, EU, Banking, Insurance, Financial Stability Report, Basel, COVID-19, Credit Risk, RRE, CRE, Climate Change Risk, Systemic Risk, Macro-Prudential Policy, NBB

    Featured Experts
    Related Articles
    News

    EBA Publishes Final Regulatory Standards on STS Securitizations

    The European Banking Authority (EBA) published the final draft regulatory technical standards specifying and, where relevant, calibrating the minimum performance-related triggers for simple.

    September 20, 2022 WebPage Regulatory News
    News

    ECB Further Reviews Costs and Benefits Associated with IReF

    The European Central Bank (ECB) is undertaking the integrated reporting framework (IReF) project to integrate statistical requirements for banks into a standardized reporting framework that would be applicable across the euro area and adopted by authorities in other EU member states.

    September 15, 2022 WebPage Regulatory News
    News

    EBA Publishes Funding Plans Report, Receives EMAS Certification

    The European Banking Authority (EBA) has been awarded the top European Standard for its environmental performance under the European Eco-Management and Audit Scheme (EMAS).

    September 15, 2022 WebPage Regulatory News
    News

    MAS Launches SaaS Solution to Simplify Listed Entity ESG Disclosures

    The Monetary Authority of Singapore (MAS) set out the Financial Services Industry Transformation Map 2025 and, in collaboration with the SGX Group, launched ESGenome.

    September 15, 2022 WebPage Regulatory News
    News

    BCBS to Finalize Crypto Rules by End-2022; US to Propose Basel 3 Rules

    The Basel Committee on Banking Supervision met, shortly after a gathering of the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS.

    September 15, 2022 WebPage Regulatory News
    News

    IOSCO Welcomes Work on Sustainability-Related Corporate Reporting

    The International Organization of Securities Commissions (IOSCO) welcomed the work of the international audit and assurance standard setters—the International Auditing and Assurance Standards Board (IAASB)

    September 15, 2022 WebPage Regulatory News
    News

    BoE Allows One-Day Delay in Statistical Data Submissions by Banks

    The Bank of England (BoE) published a Statistical Notice (2022/18), which informs that due to the Bank Holiday granted for Her Majesty Queen Elizabeth II’s State Funeral on Monday September 19, 2022.

    September 14, 2022 WebPage Regulatory News
    News

    ACPR Amends Reporting Module Timelines Under EBA Framework 3.2

    The French Prudential Control and Resolution Authority (ACPR) announced that the European Banking Authority (EBA) has updated its filing rules and the implementation dates for certain modules of the EBA reporting framework 3.2.

    September 14, 2022 WebPage Regulatory News
    News

    ECB Paper Discusses Disclosure of Climate Risks by Credit Agencies

    The European Central Bank (ECB) published a paper that examines how credit rating agencies accepted by the Eurosystem, as part of the Eurosystem Credit Assessment Framework (ECAF)

    September 13, 2022 WebPage Regulatory News
    News

    APRA to Modernize Prudential Architecture, Reduces Liquidity Facility

    The Australian Prudential Regulation Authority (APRA) announced reduction in the aggregate Committed Liquidity Facility (CLF) for authorized deposit-taking entities to ~USD 33 billion on September 01, 2022.

    September 12, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8514