NBB Decides to End Temporary Leverage Ratio Relief
The National Bank of Belgium (NBB) published a circular confirming that the temporary measure allowing the exclusion of central bank exposures from the calculation of the leverage ratio expires on March 31, 2022. The temporary measure had been activated to support the financial system in context of the COVID-19 pandemic. The expiration timeline for this coincides with the time horizon of the Pandemic Emergency Purchase Program (PEPP) of Eurosystem. Additionally, NBB published a circular on prudential expectations on de-risking, noting an increase in the number of de-risking actions, by financial institutions under its remit, for reasons related to combating money laundering and terrorist financing (AML/CFT).
“De-risking” is defined as the decision in principle, taken a priori by a financial institution, to refuse to enter into business relations with potential customers or to terminate existing business relations with current customers. This decision is on the grounds that these potential or existing customers belong to a category of persons that the financial institution alleges is linked to excessive risks of money laundering or terrorist financing (ML/FT), inter alia in view of its risk appetite or the AML/CFT system it has put in place. NBB notes that a significant number of undertakings and professionals from various sectors have been confronted with this phenomenon. While decisions not to enter into or terminate a business relationship, or not to carry out a transaction, may be consistent with the requirements of the Anti-Money Laundering Law, de-risking entire categories of customers without due regard to individual customers’ risk profiles is a sign of ineffective management of money laundering and terrorist financing risks and can have a significant impact.
NBB expects the supervised financial institutions to define and implement balanced AML/CFT policies which, while ensuring effective implementation of the obligations set out in or under the Anti-Money Laundering Law, also enable them to comply with their other legal public-order or mandatory obligations and to fulfill their societal responsibilities. NBB sets out a number of comments and recommendations to financial institutions under its remit to assist them in achieving this balance. These comments and recommendations are related to implications of the overall risk assessment and customer acceptance policy, individual risk assessment, and refusal to enter into a business relationship on grounds related to AML/CFT, updating individual risk assessments and breaking up existing business relationships, the cost of due diligence, and risk of administrative remedial measures, administrative sanctions, and civil or criminal convictions.
Related Links
Keywords: Europe, Belgium, Banking, Basel, Credit Risk, Regulatory Capital, Covid-19, Leverage Ratio, CRR, De-Risking, AML CFT, ML TF Risk, NBB
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Related Articles
EBA Proposes Standards for IRRBB Reporting Under Basel Framework
The European Banking Authority (EBA) proposed implementing technical standards on the interest rate risk in the banking book (IRRBB) reporting requirements, with the comment period ending on May 02, 2023.
FED Issues Further Details on Pilot Climate Scenario Analysis Exercise
The U.S. Federal Reserve Board (FED) set out details of the pilot climate scenario analysis exercise to be conducted among the six largest U.S. bank holding companies.
US Agencies Issue Several Regulatory and Reporting Updates
The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.
ECB Issues Multiple Reports and Regulatory Updates for Banks
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.
HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements
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.
EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR
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.
CBIRC Revises Measures on Corporate Governance Supervision
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.
HKMA Publications Address Sustainability Issues in Financial Sector
The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.
EBA Updates Address Basel and NPL Requirements for Banks
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.
ESMA Publishes 2022 ESEF XBRL Taxonomy and Conformance Suite
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.
