Financial Crime World

Belgium Strengthens Banking Regulations to Combat Financial Crime Amidst COVID-19 Pandemic

Introduction

The Belgian government has taken extraordinary measures to tackle the economic impact of the coronavirus pandemic on its financial system. The National Bank of Belgium (NBB) has worked closely with the government to introduce state guarantee schemes worth €50 billion, protecting against loan defaults by credit institutions subject to the Banking Act.

Strengthening Banking Regulations

The Banking Act aims to integrate the EU’s three pillars of banking union and transposes several key directives and regulations into Belgian law. These include:

  • Capital Requirements Directive (CRD IV): Regulates capital requirements for credit institutions
  • Financial Conglomerates Directive: Regulates financial conglomerates and their subsidiaries
  • Bank Recovery and Resolution Directive (BRRD): Regulates bank recovery and resolution measures

COVID-19 Measures

In 2020, the NBB issued communications and circulars outlining COVID-19-related measures, such as:

  • Restrictions on dividend distributions: Credit institutions are prohibited from paying dividends during the pandemic
  • Relaxed regulatory reporting formalities: Reporting requirements have been relaxed to reduce administrative burdens on credit institutions
  • Implementation of EU guidelines on ICT and security risk management: The European Banking Authority’s guidelines on information and communication technology (ICT) and security risk management were implemented

Regulatory Framework for Credit Institutions

Belgian credit institutions, including subsidiaries of foreign banks and EEA-registered entities, are subject to the country’s banking regulations. These institutions can collect deposits from the public or offer services without obtaining a separate license for lending activities. However, certain types of loans, such as consumer credit and mortgages, require separate registration.

Combating Financial Crime

To combat financial crime, only specific types of institutions may refer to themselves as banks or credit institutions in their corporate name and marketing materials. These institutions must comply with EU directives, including MiFID II, which regulates investment services.

Basic Banking Services for Enterprises

The NBB has introduced basic banking services for enterprises, providing a framework for these businesses to access essential banking services. The regulatory regime aims to ensure the stability of Belgium’s financial system while promoting economic growth amidst the pandemic.

By strengthening its banking regulations and implementing measures to combat financial crime, Belgium is taking proactive steps to protect its economy and maintain confidence in the country’s financial sector.