The National Bank of Belgium (NBB) decided to maintain the countercyclical buffer rate (CCyB) at 0% for the first quarter of 2022 and does not expect to increase the buffer until the second quarter of 2022. NBB also published a report on the impact of fintech and digitization on the banking sector in Belgium. The report provides an overview of the results of a 2020 fintech survey on banks in the country, communicating its observations and best practices on fintech and digitization. The analysis highlights that most Belgian banks have developed a genuine digital strategy; however, the degree of progress in implementing that strategy varies significantly from one bank to another. Banks that are less advanced are invited to take measures to ensure their long-term viability.
NBB had surveyed the banks in Belgium to continue the dialog on the potential developments, opportunities, risks, and threats of digitization and fintech. The survey focused on the strategic preparations, organization, and the progress of banks in this area. Based on the survey results, the report highlights the following recommendations:
- The adoption, and the periodic update, of a digital strategy and business model should continue to be a key priority for banks to ensure their short-, mid- and long-term viability by addressing the disruptive effects of digitization and of competition from non-traditional players. While many institutions have articulated a digital strategy and onboarded relevant profiles, some institutions are lagging and should act now. All banks should also continue to ensure that diversity exists or increases at board level to adequately inform their choices and to allow for their challenging of the strategy and its implementation.
- The ever-increasing dependence on information technology systems, including that of third parties as well as banks’ specific exposure as prime targets for malicious actors make it of paramount importance that banks continue to deploy a proactive, in-depth approach to address operational resilience and cyber risks linked to digitization to protect their systems, data, and customers. Banks should foster an adequate innovation risk culture to anticipate, identify, and manage emerging risks.
- A holistic vision across the lines of defense and risk management processes should continue to be a key point of focus for banks when deploying initiatives. While progress as to governance has been noted, banks should ensure that adequate resources are leveraged, and requisite skills are developed at all levels, including the various levels of management, to ensure an appropriate oversight on initiatives and to ensure compliance with existing and developing regulation in the fields of digitization and fintech.
- The identification of granular metrics should become part of planning and review of strategies and initiatives of banks. Banks should identify and track granular metrics across multiple dimensions to better inform their planning and review of their strategy and initiatives.
- Active dialog continues to be welcomed and encouraged. Further active dialog with banks in respect of their strategies, models, and initiatives will continue to contribute to NBB’s and to the institutions’ mutual understanding of existing and emerging developments and to inform the devising of upcoming policy frameworks and supervisory practices in an era of increasingly cross-sectoral frameworks.
Keywords: Europe, Belgium, Banking, CCyB, Regulatory Capital, Basel, Fintech, Digitization, Regtech, NBB
The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.
The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.
The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.
The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.
The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.
The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.
The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.
The General Board of the European Systemic Risk Board (ESRB), at its December meeting, issued an updated risk assessment via the quarterly risk dashboard and held discussions on key policy priorities to address the systemic risks in the European Union.
The Financial Conduct Authority (FCA) is seeking comments, until December 21, 2022, on the draft guidance for firms to support existing mortgage borrowers.
The Financial Stability Board (FSB) published a report that assesses progress on the transition from the Interbank Offered Rates, or IBORs, to overnight risk-free rates as well as a report that assesses global trends in the non-bank financial intermediation (NBFI) sector.