IMF published staff report, selected issues report, and the Financial System Stability Assessment (FSSA) report on Belgium. Under FSSA, IMF also published technical notes on banking, insurance, and financial conglomerate supervision; stress testing the banking and insurance sectors; and financial safety net and crisis management.
Staff and selected issues reports. Published as part of the 2018 Article IV consultation, the staff report states that the soundness of financial sector has improved considerably since the crisis. However, banking sector faces the challenge of adapting to a changing economic, technological, and regulatory environment. The transition toward a full European Banking Union is another important issue to be navigated by banks and supervisors. Furthermore, Directors encouraged the authorities to closely supervise systemically important subsidiaries of euro area banks operating in Belgium.
FSSA report. This report reveals that the financial landscape in the country has changed significantly since the global financial crisis. The banking system has contracted and banks have adopted more traditional business models, with greater emphasis on domestic lending and deposit funding. The insurance sector has seen some consolidation and is gradually moving away from traditional insurance products toward asset-management-type products. Cross-border financial linkages, while still significant, have declined and Brussels remains the home of globally significant financial market infrastructures and service providers.
Technical note on banking, insurance, and financial conglomerate supervision. The report highlights that the regulatory framework for Belgian financial institutions has been strengthened substantially since the 2013 FSAP. New national banking and insurance laws have been issued, the Bank Recovery and Resolution Directive (BRRD) and amendments to Financial Conglomerate Directive (FICOD) have been transposed, Solvency II has been implemented, and the National Bank of Belgium (NBB) has been designated as the macro-prudential authority. This has significantly improved the regulatory framework and broadened its scope to better address the challenges posed by financial conglomerates.
Technical note on stress testing the banking and insurance sectors. Stress tests on banks and insurance companies confirm that they can absorb credit, sovereign, and market losses in the event of a severe deterioration in macro-financial conditions. All banks meet minimum capital requirements and none needs to draw down its capital conservation buffer over the stress horizon. Additionally, NBB is encouraged to expand its stress testing capabilities to strengthen the monitoring of financial stability risks.
Technical note on financial safety net and crisis management. The report reveals that actions in Belgium and at the EU level have improved the Belgian financial safety net and crisis management arrangements. However, Belgium still faces challenges and further actions are needed to improve its operational capacity. At the EU level, the establishment of the single supervisory mechanism (SSM) and the single resolution mechanism (SRM) are important improvements. The Belgian authorities, particularly NBB, continue to play a critical role in maintaining financial stability, through their participation in SSM and SRM, their national roles for deposit insurance and emergency liquidity assistance (ELA) for all banks, and their recovery and resolution (planning) for certain banks.
- Staff Report
- Selected Issues Report
- FSSA Report
- Technical Note on Supervision
- Technical Note on Stress Testing
- Technical Note on Crisis Management
Keywords: Europe, EU, Belgium, Banking, Insurance, Securities, Banking Union, Stress Testing, SSM, IMF
PRA, via the consultation paper CP12/20, proposed changes to its rules, supervisory statements, and statements of policy to implement certain elements of the Capital Requirements Directive (CRD5).
EIOPA published the financial stability report that provides detailed quantitative and qualitative assessment of the key risks identified for the insurance and occupational pensions sectors in the European Economic Area.
EBA published its risk dashboard for the first quarter of 2020 together with the results of the risk assessment questionnaire.
EBA announced that the next stress testing exercise is expected to be launched at the end of January 2021 and its results are to be published at the end of July 2021.
PRA published the consultation paper CP11/20 that sets out its expectations and guidance related to auditors’ work on the matching adjustment under Solvency II.
MAS published a statement guidance on dividend distribution by banks.
APRA updated its capital management guidance for banks, particularly easing restrictions around paying dividends as institutions continue to manage the disruption caused by COVID-19 pandemic.
FSB published a report that reviews the progress on data collection for macro-prudential analysis and the availability and use of macro-prudential tools in Germany.
EBA issued a statement reminding financial institutions that the transition period between EU and UK will expire on December 31, 2020; this will end the possibility for the UK-based financial institutions to offer financial services to EU customers on a cross-border basis via passporting.
SRB published guidance on operational continuity in resolution and financial market infrastructure (FMI) contingency plans.