1. Bank supervision
The Belgian National Bank (NBB/BNB) and the Financial Services
and Markets Authority (FSMA) supervise Belgium's credit
institutions. The BNB is responsible for the microprudential
and macroprudential supervision. The FSMA supervises financial
markets and consumer protection. On November 4 2014, the
European Central Bank (ECB) in collaboration with the BNB, took
over direct supervision of leading Belgian credit institutions
in line with the Single Supervisory Mechanism (SSM).
The Banking Recovery and Resolution Directive (BRRD) came
into force on January 1 2015. As part of the implementation of
the Belgian BRRD, a resolution committee will be established
within the BNB.
2. Bank recovery/bail-in
The BRRD and related articles have already been implemented in
Belgian Law. A new Royal Decree came into force on March 3
2015. The articles relating to the BRRD are now in force. A
draft Royal Decree regarding the resolution committee has been
initiated and was submitted to the ECB, which in turn issued
its advice on January 21 2015. The Royal Decree is expected to
come into force very soon.
Under the Belgian BRRD implementation, the resolution
committee will be competent to apply the BNB resolution tools
and exercise the powers of resolution.
Belgian law provides for a bail-in tool. A Royal Decree can
be adopted to allow the resolution committee to decide a
depreciation of all or part of the eligible liabilities of a
credit institution or the conversion of its debts into shares
or other equity securities. To this end, this Royal Decree may
require that a credit institution maintains a minimum
requirement for own funds and eligible liabilities to ensure
feasibility of a bail-in. This Royal Decree can be adopted only
until December 31 2015 and can enter into force only from
January 1 2016.
The BNB is the supervision authority with regard to the rules
on the various capital buffers.
Capital conservation buffer
The capital conservation buffer has been implemented in
accordance with the CRD IV framework.
May 17 2014 to December 31 2015 – 0%
January 1 2016 – 0.625%
January 1 2017 – 1.25%
January 1 2018 – 1.875%
January 1 2019 – 2.5%
The countercyclical buffer has been implemented in
accordance with the CRD IV framework.
The BNB publishes the rate used to calculate the
countercyclical buffer on a quarterly basis on its website. The
BNB has not yet published the countercyclical buffer rate.
The G-SII buffer has been implemented in accordance with the
CRD IV framework. This rule will come into force on January 1
The buffer will be set between 1% and 3.5% on an individual
The BNB has not yet published which banks have been
identified as G-SIIs.
The O-SII buffer has been implemented in accordance with the
CRD IV framework.
The buffer is capped at 2% and will be set on an individual,
consolidated or sub-consolidated basis.
The O-SII buffer applies from January 1 2016.
The BNB has not yet published which banks have been
identified as OSIIs.
Systemic risk buffer
The systemic risk buffer has been implemented in accordance
with the CRD IV framework. The BNB may require a buffer of at
least 1%. The buffer will be reviewed every two years.
The BNB has not yet published the systemic risk buffer.
The buffer is not capped, although the EU must be involved
in the decision-making process if the BNB intends to raise the
buffer above 3%.
4. Call options
Belgium has not issued any additional national rules with
regard to regulatory or tax calls in addition to Article 78 of
5. Coupon payment
The rules on the maximum distributable amount (MDA) calculation
in the case of buffer breaches follows CRD IV and the rules are
implemented in the act of April 25 2014 regarding the status
and control of credit institutions.
A credit institution may not make a distribution in cases of
buffer breaches. Furthermore, the rule prohibits distribution
to any institution that meets the combined buffer requirement
through making a distribution in connection with Common Equity
Tier 1 (CET1) capital to an extent that its CET1 capital would
decrease to a level where the combined buffer requirement was
no longer met.
However, an institution that fails to meet the combined
buffer requirement must calculate the MDA and notify the BNB of
that MDA. That institution may not distribute more than the MDA
for the following actions: (a) making a distribution in
connection with CET1 capital; (b) creating an obligation to pay
variable remuneration or discretionary pension benefits or pay
variable remuneration if the obligation to pay was created at a
time when the institution failed to meet the combined buffer
requirements; or, (c) making payments on Additional Tier 1
This requirements section only applies in so far as a
resulting suspension of the payments does not cause conditions
for initiating winding-up proceedings in accordance with the
act of August 8 1997 on bankruptcy.
The BNB also has intervention powers when it is likely that,
within 12 months, a credit institution will no longer be able
to fulfil its obligations under the relevant act or other
statutory instruments which govern the institution's
6. Credit default swap contracts
Belgium has not issued any additional rules with regard to the
use of credit swaps or other tools to mitigate credit risk in
addition to CRR regulation.
CRR disclosure and reporting rules apply. The credit
institutions are required to disclose information on their
capital ratio and capital buffers.
The BNB has not yet published the frequency and the form of
8. Leverage ratio and liquidity coverage ratio
The leverage ratio will only be introduced in 2018, depending
on a 2016 proposal from the European Commission. Pending a
mandatory ratio for leverage effect at European level, the BNB
has decided to maintain its solvability ratio requirement.
Specific reporting requirements were issued to verify that
obligation. Quarterly reporting is to be transmitted on a
consolidated basis. The reporting period is set as the first
working day of the second civil month, depending on the report
date. This reporting will enter into force for accounts settled
on December 31 2014.
9. Loss absorption features
Loss absorbency features of AT1 and tier 2 follow the CRR. Only
AT1 provides for going-concern loss absorption while tier 2
provides for gone-concern loss absorption.
According to the BRRD implementing regulation, shareholders
and other instruments of ownership (including preference
shares, which are a national deviation from the BRRD) will bear
the first losses and will be the first stakeholders to
contribute to the resolution by means of a mandatory
write-down/cancellation/conversion of their instruments, taking
account of the ranking of these instruments in insolvency
proceedings. Creditors will bear losses after the
The 'no creditor worse-off than under normal insolvency
proceedings' principle will apply.
10. Minimal Capital
Belgium complies with CRR requirements. The levels of CET1 and
tier 1 capital ratios are at the highest level within the
explicit ranges set out in Article 465(1) CRR. Belgium has
chosen to adopt any phase-in regulations regarding own funds
Min CET1 ratio
January 1 2014 – 4%
January 1 2015 – 4.5%
Min tier 1 ratio
January 1 2014 – 5.5%
January 1 2015 – 6%
Min total capital
11. Pillar 2
The main rules on pillar 2 are set out in Book II of the act of
April 25 2014 regarding the status and control of credit
Belgian law provides for guidance on pillar 2 requirements.
It focuses on the joint responsibility of the management board,
general risk management requirements, organisational duties,
documentation, resources, and outsourcing.
Belgian law also provides for an asset encumbrance ratio,
which allows a permanent monitoring of the balance structure.
This ratio is laid down for each credit institution in a BNB
regulation and will require a bi-annual evaluation that
particularly takes into account the evolution of the balance
structure of the credit institutions as well as the influence
of the ratio on their external funding costs.
Pillar 2 requirements are subject to the disclosure rules on
publishing quarterly reports on own funds and the institution's
internal capital adequacy assessment.
12. Qualifying capital
The BNB has no authority to issue local rules on what
instruments qualify as CET1, AT1 or tier 2. In this respect,
standard CRR rules apply.
In Belgium the following are considered as CET1:
- ordinary shares (ordinary financial
instruments representing the share capital of a Belgian
- yield enhanced securities
- preferential shares with voting
Deferred tax assets
Belgium has not issued any rules with regard to the
treatment of the deferred tax assets in addition to CRR
Deferred tax assets that rely on future profitability and
existed before January 1 2014 need to be deducted in full from
CET1 from January 1 2014.
A phase-out begins on January 1 2015, after which 10% of
those deferred tax assets that rely on future profitability
need to be deducted. This increases by 10% annually and reaches
90% in 2023.
With regard to deferred tax assets created in 2014 or later,
20% needs to be deducted in 2014, 40% from January 1 2015, 60%
in 2016, 80% in 2017, and 100% from January 1 2018.
In Articles 18 and 19 of the annex of the Royal Decree of
April 10 2014, which relates to the approval of the regulation
of the BNB of March 4 2014 on the implementation of Regulation
575/2013, the BNB has issued supplemental rules in line with
Article 467(3) CRR.
Article 35 CRR applies from January 1 2014 to December 31
There is an exception for unrealised losses on fixed
interest securities and credits. The percentages of inclusion
in original own funds of category 1 year institutions are the
January 1 2014 – 20%
January 1 2015 – 40%
January 1 2016 – 60%
January 1 2017 – 80%
The BNB has accepted that banks can include a filter on
unrealised gains and losses relating to exposure to central
governments, and this will continue until the European fair
value accounting rule IAS 39 has been replaced.
This special rule does not apply for the part of the total
amount of net losses relating to exposure on central
administrations classified in the category available-for-sale
that exceeds 5% of the account value of the relevant portfolio.
The part exceeding 5% is treated as set out in Article 35
Article 34 of the Royal Decree of April 25 2014 deals with
supplemental rules as required under Article 486(6) CRR on
grandfathering and phase-in provisions in relation to CRR rules
on own funds requirements.
The following percentages have been determined:
January 1 2014 – 80%
January 1 2015 – 70%
January 1 2016 – 60%
January 1 2017 – 50%
January 1 2018 – 40%
January 1 2019 – 30%
January 1 2020 – 20%
January 1 2021 – 10%
January 1 2022 – 0%
13. Regulatory intervention
Regulatory intervention powers were introduced in 2008 under
the Belgian act relating to the measures aimed at promoting
financial stability, and in particular establishing a public
guarantee. The public guarantee represents a protection reserve
of the deposits and of the financial instruments for investors
in case of failure of a bank. The intervention tools under this
act are fairly limited.
In October 2011, the Belgian government nationalised Dexia
Banque Belgique (now Belfius). Dexia was almost on the brink of
bankruptcy after the aggravation of the crisis due to European
14. Stress tests
The five Belgian banks are participating in the 2014 EBA stress
test. Dexia and Axa Bank Europe did not pass the European
The BNB also executes annual national stress tests of the
major banks within the framework of its supervisory measures.
The results of these stress tests are normally published on the
website of the BNB.
The BNB has not yet taken a position on the implementation of
the buffer for global systemically important institutions
(G-SIIs). However, the BNB will decide which firms will be
required to hold a capital buffer for G-SIIs or other
systemically important institutions (O-SIIs) respectively
before the provisions on those buffers come into effect on
January 1 2016. No other additional rules in relation to sifis
have been issued.
T: + 32 2 800 71 66
Benoît is a partner of Laga, working in the
business law department. He focuses on M&A,
corporate law and capital markets, including financial
regulatory and litigation work. He was previously a
partner at NautaDutilh in Brussels and has been a
member of the Brussels Bar since 1987. He graduated
from the universities of Louvain, Ghent Brussels
(Belgium) and Duke University (US). He has been
extensively published and has lectured on his
specialist subjects mentioned above.
T: +32 2 800 71 65
Morgane joined the business law department at Laga
in 2014. Her areas of practice include M&A,
corporate law and capital markets. Morgane holds law
degrees from the University of Louvain and the
Facultés Universitaires Saint Louis,
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