## 1belea2023009 - 2023. It contains technical analysis and detailed

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### Executive summary and key findings
- FSAP targeted review of Belgium’s Less Significant Institutions (LSI) and third-country branches (TCBs) banking regulation and supervision focusing on:
  - supervisory strategy and approach, corporate governance, business model review, credit risk, interest rate risk in the banking book (IRRBB), related party transactions, and authorities’ views on the EA framework and banking union transition.
- Size and materiality:
  - LSIs represent about 10 percent of banking assets (about 24 percent of GDP) across 16 credit institutions.
  - One material TCB exists but is wholesale funded and raises no concerns for retail depositors.
- Supervisory framework and practices:
  - National Bank of Belgium (NBB) and Financial Services and Markets Authority (FSMA) have well established processes for prudential, product and conduct supervision of LSIs.
  - NBB has embedded the SSM Supervisory Review and Evaluation Process (SREP), imposes Pillar 2 requirements, and is implementing the ECB/SSM’s revised Pillar 2 Guidance framework.
  - FSMA has a well-developed MIFID risk assessment framework and is involved in introducing a Banking Oath.
- Corporate governance:
  - Supervisory expectations for non-executive directors’ supervisory functions should be clarified and strengthened, including the role of independent non-executive directors (e.g., as the chair of board committees).
  - Potential conflicts of loyalty should be more explicitly considered in designating independence for non-executives.
  - Independence of control functions’ uncensored reporting access to non-executives and board committees could be further clarified.
  - NBB should review whether these corporate governance recommendations apply to other regulated financial sectors.
- IRRBB and business models:
  - NBB has a conservative approach to IRRBB supervision and understands LSI and TCB business models.
  - In early 2023 market turmoil, NBB requested banks to regularly report potential losses on held-to-maturity securities if sold at market prices.
  - Where business model weaknesses are observed, NBB could provide examples of effective early corrective action and intervention.
- Internal decision-making and documentation:
  - Ensure consistent practices for internal reporting, onsite inspections, documenting evaluation of institutions’ responses to onsite findings, and approval of remedial actions across departments.
  - Continue to ensure adequate staffing for LSI and TCB supervision and address supervisory IT risk concerns.
  - Add banks’ internal capital target to NBB’s internal monitoring.
  - Implement a structured approach for conduct risk and consumer protection information sharing with FSMA and the Ministry of Economic Affairs.

### Recommendations (Regulation and Supervision of LSIs)
- All recommendations addressed to the NBB.
- Priorities: H = high, M = medium, L = low.
- Time frames: I = immediate (within one year), NT = near-term (within 2–3 years), MT = medium-term (within 3–5 years).
- Recommendations listed in source:
  - 1) Strengthen and further clarify the supervisory expectations for the supervisory function of non-executive directors and consider strengthening the role of independent non-executive directors (e.g., fulfilling the roles of chair of board committees) (¶41, 43). Priority: H. Timeframe: NT.
  - 2) Consider not to allow independent non-executives to be independent at different levels within a group (e.g., the parent and the subsidiary) (¶45). Priority: M. Timeframe: NT.
  - 3) Clarify and provide further assurance on the independent reporting of the control functions to the non-executive directors (¶44). Priority: M. Timeframe: NT.
  - 4) Review whether the corporate governance recommendations are also relevant for other regulated financial institutions (¶48). Priority: M. Timeframe: NT.
  - 5) Maintain adequate prudential supervisory staffing for LSI supervision to avoid gaps in the supervisory work program (¶55, 63). Priority: H. Timeframe: NT.
  - 6) Ensure consistent practices across departments for documenting key supervisory decisions related to onsite inspections and their recommendations (¶64). Priority: H. Timeframe: I.
  - 7) Ensure that all relevant information regarding changes to Pillar 2 Requirements (P2R) and its implications are reflected in the documentation of the internal decision-making process (¶58). Priority: H. Timeframe: I.
  - 8) Enhance internal NBB reporting by adding banks’ internal capital targets to the ratios monitored (¶54). Priority: M. Timeframe: I.
  - 9) Collect consumer protection and conduct information in a structured approach to feed into the SREP (¶21). Priority: M. Timeframe: NT.

### Market structure and sector metrics
- Sector composition and concentration:
  - At end-2022, banks account for 52 percent of financial sector assets at 239 percent of GDP.
  - There are 30 credit institutions, 44 Euro-Area branches and 5 third-country branches in Belgium.
  - The top four banks/banking groups (BNP Paribas Fortis, KBC Bank, Belfius Bank, ING Belgium) hold around 73 percent market share by assets.
  - Foreign ownership in the banking industry is 48 percent.
- Supervision coverage:
  - Almost 90 percent of banking sector assets are directly supervised by SSM.
  - Nine SIs, comprising 14 credit institutions governed by Belgium law, are active in Belgium in 2022 and are directly supervised by SSM.
  - The other 16 credit institutions are LSIs and are directly supervised by NBB.
  - Note: One LSI wound-down its operations early 2023, bringing the number of LSIs to 15.
- LSI size and business models:
  - One LSI related to an international central securities depository (CSD) group is systemically relevant; other LSIs are relatively small.
  - Two LSIs have group consolidated balance sheets of around EUR 10 billion, two others around EUR 5 billion, remaining LSIs well below EUR 5 billion.
  - Nine LSIs are retail or private banks; others are diverse; one LSI has a digital business model.
  - Key challenges: IT investments for digitalization and cyber security; large incumbents have scale advantages.
- Financial soundness indicators (2022Q4 and end-2022):
  - LSIs on average had Common Equity Tier 1 close to 25 percent.
  - Liquidity Coverage Ratio above 200 percent.
  - Non-Performing Loans (NPLs) at historically low levels of about 0.4 percent.
- TCBs:
  - TCBs focus on specific niches and are relatively small.
  - Apart from one TCB, most have limited size and are not active in attracting retail deposits.
  - The largest TCB is fully wholesale funded.

### Institutional setting, mandates, and coordination
- EU bodies:
  - SSM composed of ECB and NCAs; ECB directly supervises SIs and oversees NCAs’ supervision of LSIs; ECB has direct responsibility (with NCA proposals) for licensing, withdrawal of licenses, and qualifying holdings in LSIs.
  - EBA ensures effective and consistent prudential regulation and supervision and coordinates measures to prevent and counter ML/FT.
- National authorities:
  - NBB: NCA responsible for prudential supervision of Belgian LSIs and third-country branches, participates in JSTs for SIs, supervises stock-broking firms, insurance companies, payment institutions, and oversees FMIs, payment systems, and macroprudential supervision.
  - FSMA: responsible for financial markets and conduct supervision, management companies UCITS, asset management companies, investment advice firms, supplementary pensions, market supervision, and rules of conduct; conduct supervision includes bank savings products.
  - FPS Economy (Ministry of Economic Affairs): responsible for conduct supervision of consumer credits and payment services (consumer loans, credit cards, mortgages, and payment services provided in Belgium).
- Coordination and information exchange:
  - NBB exchanges LSI information constructively with SSM and complies with notification requirements; provides LSI Annual Report including prioritization, work planning, assessment of significance, and monitoring metrics.
  - NBB and FSMA adopted a cooperation protocol in 2013 with coordination of inspections and periodic management-level meetings; FSMA has no direct contact with SSM.
  - Information sharing gaps:
    - No structured approach between FPS Economy and NBB to share consumer complaints or risk assessments.
    - NBB has not inquired and received information about FSMA’s risk assessment of banks.
    - Enhanced information exchange could better inform NBB of consumer protection and conduct issues for incorporation into SREP.

### Legal, regulatory and governance specifics
- Euro-Area framework:
  - European Directives need transposition into domestic law; European Regulations have direct applicability.
  - Belgium transposed CRD V by amending the Belgian Banking Law; CRR II is directly applicable.
  - EBA Guidelines are adopted in Belgium via NBB circulars (and, if needed, legal amendments).
- Related party and intragroup transactions:
  - Euro-Area related party framework largely limited to members of the management body; loans to shareholders or intra-group exposures/transactions are not subject to Euro-Area related party framework.
  - Belgium framework broader than CRD and EBA Guidelines; includes transactions with all (executive and non-executive) board members and shareholders (natural and legal persons).
  - Related party exposures with board members and shareholders larger than EUR 500,000 are subject to annual NBB reporting.
  - Intragroup exposure limits applied by NBB:
    - Foreign intragroup exposures cannot exceed 25 percent of the limits set out under the CRR and under no circumstances, 100 percent of Tier 1 capital.
    - Article applicable to all Belgian SIs and LSIs during the transitional period foreseen under the CRR — until 31 December 2028.
  - Belgian Banking Law requires approval of intragroup transactions that have strategic implications.
- Article 77 (Banking Law) — authorization of strategic bank decisions:
  - Prior authorization required for strategic decisions applicable to all banks (SIs and LSIs).
  - Definition of “strategic decisions” includes acquisitions/establishments, joint ventures, establishment in another country, cooperation agreements, portfolio/activity contributions/acquisitions, mergers/demergers, and decisions to acquire shares in a non-financial institution above EUR 250 million or exceeding 5 percent of the capital of the credit institution.
  - Art. 3, 63: competent authority can specify via an NBB regulation which decisions should be considered ‘strategic’.
- Intragroup safeguards and independent non-executive oversight:
  - NBB requires independent non-executive board members to evaluate intragroup transactions and, for potentially material operations, setup of an ad hoc committee of independent non-executive directors to issue an opinion.
- Governance and Fit & Proper deviations and specifics:
  - Belgium one-tier Board system; majority should be non-executives.
  - Banking Law requires chair of the Board is a non-executive director (not necessarily independent non-executive).
  - Committee composition: committees require non-executive membership but (except audit) only one independent non-executive; chairs need not be independent.
  - No prohibition on a single individual chairing both the risk committee and the audit committee and also chairing the board.
  - Two non-compliances with EBA Suitability Guidelines (proportionality arguments):
    - Calculation of number of directorships for time commitment: Belgian law counts several directorships in undertakings in which other entities of the banking group have a qualifying holding as one single mandate.
    - No supervisory suitability assessment required for the CFO when not part of the Board/Executive Committee of a significant CRD-institution.
  - Belgium stricter than EBA in some respects:
    - Fit and proper reviews are conducted ex ante for new board members (NBB review before appointment).
    - Variable remuneration capped at 50 percent of fixed remuneration.
  - Recommendation: NBB to provide more detailed guidance in Governance Manual on supervisory function expectations of non-executive board members and to consider stronger measures on conflicts of loyalty (e.g., independent non-executive at parent not being considered independent at subsidiary).

### IRRBB, P2R/P2G, SREP and supervisory approach
- IRRBB:
  - Belgium declared non-compliance with the EBA Guidelines on Management of Interest Rate Risk Arising from Non-Trading Book Activities for sound prudential reasons, while fully complying with EBA/GL/2018/02.
  - Belgium adopted a more conservative supervisory outlier test by imposing more restrictive limits on Non-Maturity Deposits (NMDs).
  - EBA adopted a new regulatory package on IRRBB in October 2022; NBB obliged to revise its circular in 2023 to ensure full alignment; new package may be on average stricter for the Euro-Area than previous guidelines but is less strict than the current NBB approach.
- P2R and P2G:
  - NBB uses SSM SREP methodology with add-on per risk type instead of overall capital add-on; since 2022 quantitative requirements complemented with qualitative ones.
  - NBB adopted since 2022 the approach to provide more qualitative recommendations and requirements; implementing SSM 2022 SI P2G bucketing approach in 2023, calibrated for Belgian LSIs.
  - Revised approach expected to result in more LSIs receiving a P2G.
  - Proposals for changes to P2R could be better motivated by incorporating wider information (e.g., rating agencies) and explaining link to P2G.
- SREP and LSI classification:
  - New SSM LSI classification regime entered into force on 1 January 2022 introducing High-Impact (HI) and High-Risk (HR) LSI categories.
  - NBB uses SSM SREP methodology; SREP elements: business model and profitability; internal governance and risk management; risks to capital and excessive leverage; risks to liquidity and funding.
  - Comprehensive SREP at least every 3 years; for HI LSIs conducted annually.
  - NBB uses SSM tool to assign risk scores per SREP element and overall global risk score (1 – 4).
  - For Pillar 2 requirement (P2R) calculation, NBB uses its own excel tool that calculates per risk element a capital add-on.
- Monitoring and reporting:
  - NBB uses an excel based Quick Look Tool (QLT) for internal monitoring providing quarterly key financial indicators and flags for SSM notification thresholds.
  - QLT could be enhanced by adding banks’ internal capital targets to monitored ratios.
  - Annually TB Department submits presentation with global overview and SREP scores of LSIs for NBB Board approval and uses tracking template to monitor planning progress.
  - NBB provides SSM with additional reporting (e.g., LSI annual report, monitoring of credit metrics, assessment of significance, ad-hoc reporting).

### Onsite examinations, liquidity, climate and business model review
- Onsite examinations:
  - Focus largely on governance, control functions and credit risk; governance inspections typically include review of risk, internal audit and compliance, and to the extent practical AML/CFT aspects.
  - IT and cyber risk onsite examinations only took place in last 5 years at High Impact LSIs; others subject to offsite review and questionnaires with possible short visits.
  - NBB should ensure consistent practices across departments for documenting key supervisory decisions related to onsite inspections and their recommendations.
  - Action plans from inspected LSIs are required; in high-risk findings NBB could use article 234 of Belgian Banking Law to convert action plans into “remedial” action plans.
  - FSAP review found it was not evident that institution significance and repeat findings were consistently taken into account in elevating decisions or remedial actions.
- Liquidity:
  - NBB requested banks to report potential losses on held-to-maturity securities if sold at market prices in response to early 2023 market events.
  - NBB is reviewing its approach to Pillar 2 liquidity requirements; adequate monitoring of liquidity metrics is in place.
- Climate:
  - NBB considering how to take climate into account in risk assessment and SREP; guidance issued by ECB/SSM taken into account.
  - NBB conducted climate change risk surveys among LSIs; results could feed into qualitative SREP requirements to raise awareness and stimulate LSIs to consider climate impacts on clients and their own business models.
- Business model review:
  - NBB demonstrates good understanding of business models and incorporates concerns in supervisory approach for LSIs and TCBs.
  - Authorities have used supervisory approaches resulting in orderly wind-downs where relevant.

### Supervisory resources and capacity
- Staffing and capacity:
  - TB (Supervision of Banks): about 124 fte; TA (General Supervision): about 56 fte; TP (Payments Oversight): about 51 fte.
  - Finding: LSI supervision staffing constraints affected the 2022 SREP exercise and internal SSM benchmarking.
  - Due to supervisory staff turnover and time to fill vacancies, SREP reviews planned for 2022 were delayed to 2023.
  - Internal SSM benchmarking indicates staffing levels for LSI supervision at NBB are below SSM average.
  - Recommendation: NBB should continue to ensure adequate prudential supervisory staffing for LSI supervision to avoid gaps in the supervisory work program.

### Conduct supervision and FSMA interaction
- FSMA capabilities:
  - FSMA has a well-developed framework for product and conduct supervision of banks and a well-developed MIFID risk assessment framework.
  - FSMA risk assessment for banks combines information on size of retail investment activities/services, scoring on MIFID Cartography, document review and red-flags (client questions, number of complaints, news, whistleblowing, ombudsman).
  - FSMA is working on introduction of a Banking Oath:
    - Draft law approved by the Council of Ministers in April 2023 and submitted to various bodies including ECB; under discussion in Parliament.
    - Banking Oath will increase awareness of individual responsibilities and subject breaches to disciplinary proceedings before FSMA; FSMA would keep a register of disciplinary sanctions.
    - Framework would make it more difficult for persons subject to disciplinary sanctions to continue careers in leading banking roles.
- Interaction gaps:
  - FSMA systematically sends NBB reports of conduct inspections; FSMA has no direct contact with SSM.
  - NBB has not inquired and received FSMA’s risk assessment of banks; FSMA’s risk assessment results could inform NBB’s SREP (e.g., flagging weak governance, compliance, IT problems).

*Source: 1belea2023009 - 2023. It contains technical analysis and detailed*

### 2023. It contains technical analysis and detailed

### 1belea2023009 - 2023. It contains technical analysis and detailed

### Executive summary and key findings
- The FSAP undertook a targeted review of Belgium’s Less Significant Institutions (LSI) and third-country branches (TCBs) banking regulation and supervision, focusing on supervisory strategy and approach, corporate governance, business model review, credit risk, interest rate risk in the banking book (IRRBB), related party transactions, and authorities’ views on the EA framework and banking union transition.
- Size and materiality:
  - LSIs represent about 10 percent of banking assets (about 24 percent of GDP) across 16 credit institutions.
  - One material TCB exists but is wholesale funded and raises no concerns for retail depositors.
- Supervisory framework and practices:
  - National Bank of Belgium (NBB) and Financial Services and Markets Authority (FSMA) have well established processes for prudential, product and conduct supervision of LSIs.
  - NBB has embedded the SSM Supervisory Review and Evaluation Process (SREP), imposes Pillar 2 requirements, and is implementing the ECB/SSM’s revised Pillar 2 Guidance framework.
  - FSMA has a well-developed MIFID risk assessment framework and is involved in introducing a Banking Oath.
- Corporate governance:
  - The regulatory framework for corporate governance could be enhanced—supervisory expectations for non-executive directors’ supervisory functions should be clarified and strengthened, including the role of independent non-executive directors (e.g., as the chair of board committees).
  - Potential conflicts of loyalty should be more explicitly considered in designating independence for non-executives.
  - The independence of control functions’ uncensored reporting access to non-executives and board committees could be further clarified.
  - NBB should review whether these corporate governance recommendations apply to other regulated financial sectors.
- IRRBB and business models:
  - NBB has a conservative approach to IRRBB supervision and understands LSI and TCB business models.
  - In early 2023 market turmoil, NBB requested banks to regularly report potential losses on held-to-maturity securities if sold at market prices.
  - Where business model weaknesses are observed, NBB could provide examples of effective early corrective action and intervention.
- Internal decision-making and documentation:
  - NBB should ensure consistent practices for internal reporting, onsite inspections, documenting evaluation of institutions’ responses to onsite findings, and approval of remedial actions across departments.
  - NBB should continue to ensure adequate staffing for LSI and TCB supervision and address supervisory IT risk concerns.
  - Banks’ internal capital target could be added to NBB’s internal monitoring.
  - A structured approach for conduct risk and consumer protection information sharing with FSMA and the Ministry of Economic Affairs should be implemented.

### Recommendations (Table 1: Regulation and Supervision of Less Significant Institutions)
- 1) Strengthen and further clarify the supervisory expectations for the supervisory function of non-executive directors and consider strengthening the role of independent non-executive directors (e.g., fulfilling the roles of chair of board committees) (¶41, 43). Priority: H. Timeframe: NT.
- 2) Consider not to allow independent non-executives to be independent at different levels within a group (e.g., the parent and the subsidiary) (¶45). Priority: M. Timeframe: NT.
- 3) Clarify and provide further assurance on the independent reporting of the control functions to the non-executive directors (¶44). Priority: M. Timeframe: NT.
- 4) Review whether the corporate governance recommendations are also relevant for other regulated financial institutions (¶48). Priority: M. Timeframe: NT.
- 5) Maintain adequate prudential supervisory staffing for LSI supervision to avoid gaps in the supervisory work program (¶55, 63). Priority: H. Timeframe: NT.
- 6) Ensure consistent practices across departments for documenting key supervisory decisions related to onsite inspections and their recommendations (¶64). Priority: H. Timeframe: I.
- 7) Ensure that all relevant information regarding changes to Pillar 2 Requirements (P2R) and its implications are reflected in the documentation of the internal decision-making process (¶58). Priority: H. Timeframe: I.
- 8) Enhance internal NBB reporting by adding banks’ internal capital targets to the ratios monitored (¶54). Priority: M. Timeframe: I.
- 9) Collect consumer protection and conduct information in a structured approach to feed into the SREP (¶21). Priority: M. Timeframe: NT.
- Notes:
  - All recommendations are addressed to the NBB.
  - In terms of priorities, H, M, and L stand for high, medium and low.
  - In terms of time frame, I, NT, and MT stand for immediate (within one year), near-term (within 2–3 years), and medium-term (within 3–5 years).

### Market structure and sector metrics
- Sector composition and concentration:
  - At end-2022, banks account for 52 percent of financial sector assets at 239 percent of GDP.
  - There are 30 credit institutions, 44 Euro-Area branches and 5 third-country branches in Belgium.
  - The top four banks/banking groups (BNP Paribas Fortis, KBC Bank, Belfius Bank, ING Belgium) hold around 73 percent market share by assets.
  - Foreign ownership in the banking industry is 48 percent.
- Supervision coverage:
  - Almost 90 percent of banking sector assets are directly supervised by SSM.
  - Nine SIs, comprising 14 credit institutions governed by Belgium law, are active in Belgium in 2022 and are directly supervised by SSM.
  - The other 16 credit institutions are LSIs and are directly supervised by NBB.
  - Note: One LSI wound-down its operations early 2023, bringing the number of LSIs to 15.
- LSI size and business models:
  - One LSI is related to an international central securities depository (CSD) group and is systemically relevant; other LSIs are relatively small.
  - Two LSIs have group consolidated balance sheets of around EUR 10 billion, two others around EUR 5 billion, remaining LSIs well below EUR 5 billion.
  - Nine LSIs are retail or private banks; others are diverse; one LSI has a digital business model.
  - Key challenges for LSIs include IT investments for digitalization and cyber security; large incumbents have scale advantages.
- Financial soundness indicators (2022Q4 and end-2022):
  - LSIs on average had Common Equity Tier 1 close to 25 percent.
  - Liquidity Coverage Ratio above 200 percent.
  - Non-Performing Loans (NPLs) at historically low levels of about 0.4 percent.
- TCBs:
  - TCBs focus on specific niches and are relatively small.
  - Apart from one TCB, most have limited size and are not active in attracting retail deposits.
  - The largest TCB is fully wholesale funded.

### Institutional setting, mandates, and responsibilities
- SSM and EBA roles:
  - SSM is the legislative and institutional framework for EU bank supervision; composed of ECB and NCAs.
  - ECB directly supervises SIs and oversees NCAs’ supervision of LSIs; ECB has direct responsibility (with NCA proposals) for licensing, withdrawal of licenses, and qualifying holdings in LSIs.
  - The ECB can take enforcement action and, in practice, has relied on NCAs but may assist onsite inspections or take over supervision in exceptional circumstances.
  - EBA is tasked with ensuring effective and consistent prudential regulation and supervision across the European banking sector and contributes to the European Single Rulebook; EBA coordinates measures to prevent and counter ML/FT.
- National authorities and scopes:
  - NBB is the NCA responsible for prudential supervision of Belgian LSIs and third-country branches, participates in JSTs for SIs, supervises stock-broking firms, insurance companies, payment institutions, and oversees FMIs, payment systems, and macroprudential supervision.
  - FSMA is responsible for financial markets and conduct supervision, including management companies UCITS, asset management companies, investment advice firms, supplementary pensions, market supervision (issuance of public financial instruments), and rules of conduct; conduct supervision includes bank savings products.
  - FPS Economy (Ministry of Economic Affairs) is responsible for conduct supervision of consumer credits and payment services (consumer loans, credit cards, mortgages, and payment services provided in Belgium).
- Coordination and oversight:
  - NBB participates in ECB SI supervision via joint supervisory teams; operational division of responsibilities between NBB and ECB is laid down in the SSM Framework.
  - Authorization and supervision of non-EEA bank branches and AML/CFT supervision for SIs and LSIs is the responsibility of NCAs.

### Context, scope, and methodology of the FSAP targeted review
- Scope and drivers:
  - The targeted assessment took into account 2018 FSAP recommendations and relevant Euro-Area regulatory and market developments (including Euro-Area Basel Core Principles Assessment and Basel RCAP).
  - The review focused on progress on 2018 FSAP recommendations and on LSI/TCB supervisory topics: supervisory strategy and approach, corporate governance, business model review, credit risk, IRRBB, related party transactions, and authorities’ views on EA framework and banking union transition.
- Evidence base:
  - IMF accessed a selection of supervisory files covering the period 2020 – 2022.
  - The assessor benefitted from inputs and meetings with NBB, FSMA, Ministry of Economic Affairs, professional organizations and banks.

*Source: 1belea2023009 - 2023. It contains technical analysis and detailed*

### 17. The EU Commission can initiate proposals for EU banking regulations, which require

### 17. The EU Commission can initiate proposals for EU banking regulations, which require

### Cooperation and Information Exchange
- Paragraph 18: The NBB exchanges constructively all the necessary LSI information to the SSM and complies with the required notification requirements. In addition to the scheduled regular call with the SSM country desk, the NBB provides the SSM amongst other with the LSI Annual Report, including the prioritization and work planning, assessment of significance (of High Impact and High Risk LSIs), and information that allows for the monitoring of LSI risk metrics.
- Paragraph 19: Some collaboration between the NBB and the FSMA on conduct issues exists in line with Belgian regulatory requirements. The law provides that the NBB shall decide on the application for authorization of a credit institution and obtain the advice of the FSMA on adequacy of the organization of the credit institution, in particular its integrity policy, from the point of view of compliance with the rules of conduct. Similar provisions apply to stockbroking firms.
- Paragraph 20: NBB and FSMA adopted a cooperation protocol in 2013. Key practices:
  - FSMA’s Inspection Team holds a coordination meeting with NBB inspection teams in the first quarter to discuss yearly planning to avoid or coordinate simultaneous inspections.
  - FSMA systematically sends the NBB reports of conduct inspections carried out with entities registered with the NBB.
  - Periodic management-level meetings take place between NBB and FSMA.
  - FSMA has no direct contact with SSM; where relevant, FSMA informs NBB about findings or concerns regarding SIs or Euro-Area branches, and the NBB passes this information to the relevant JST.
- Paragraph 21: Information sharing on consumer protection and market conduct could be further improved:
  - No structured approach exists between the FPS Economy and the NBB to share information; the NBB does not obtain in a structured manner information about consumer complaints or the risk assessment of the FPS Economy.
  - Despite active information exchange between FSMA and NBB, the NBB has not inquired and received information about FSMA’s risk assessment of banks.
  - Enhanced information exchange could better inform the NBB of potential consumer protection and conduct issues and help incorporate these into risk assessment and the Supervisory Review and Evaluation Program (SREP).

### NBB Internal Structure and Coordination
- Relevant departments (Paragraph 22):
  - TA (General Supervision): about 56 fte; covers macroprudential supervision, microprudential policy, governance & accounting policy, and off-site AML/CFT supervision.
  - TB (Supervision of Banks): about 124 fte; covers off-site prudential supervision, on-site prudential supervision, and some support functions. Staff participate in JSTs; about 60 percent of on-site prudential staff resources are allocated to SIs.
  - TP (Payments Oversight): about 51 fte; focuses on Payment Systems and Financial Market Infrastructures (FMIs) oversight, including CSDs. Prudential supervision of the LSI that is part of a CSD group is conducted by TP for efficiency reasons.
- Internal coordination / decision preparation (Paragraph 23):
  - Committees do not have decision-making mandates but discuss policy proposals, prepare decisions, coordinate cross-departmentally, and benchmark.
  - Risk Committee: regrouping all prudential services (heads of department) and the director responsible for microprudential policy (part of TA); discusses regulatory policy proposals and horizontal analyses before escalation to the NBB Board.
  - SSM Risk Committee: regrouping prudential services (TA-TB-TP), legal and international coordination, and the director responsible for banking supervision; briefs the director before SSM Supervisory Board meetings and discusses SSM-related topics including strategic decisions by Belgian SIs.
  - Macro-Financial Committee: regrouping prudential services (heads of department) with financial markets, statistics and economic research departments; deals with macro-prudential policy analyses and proposals before escalation to the NBB Board.
  - Committee of T-services (cTc) and PRIME Committee: regroup prudential services including operational departments (IT and data collection) and deal with cross-functional operational aspects (e.g., gathering prudential reporting).
  - Climate Change Hub: cross-departmental information sharing platform focused on awareness, data gathering, and implementation/update of a climate risk dashboard.
- Annual Risk Review (Paragraph 24):
  - NBB conducts an Annual Risk Review used as input for supervisory and policy priorities across banking, insurance and FMIs.
  - Risk assessment considers geopolitical situation, macro-economic and business environment, and major risk drivers.
  - Per-sector assessments result in work priorities and identify cross-sector issues (e.g., climate, digitalization, AML/CFT, macroprudential work).
  - SSM priorities are taken into account in the banking sector risk review.
  - NBB is embedding the Annual Risk Assessment further into its global management cycle by connecting it more explicitly to prudential strategy and budgeting processes.

### Legal and Regulatory Framework — Euro-Area Regulatory Framework
- Introduction (Paragraph 25):
  - European Directives, Regulation and Guidelines detail requirements for Belgian banks.
  - European Directives need transposition into domestic law; European Regulations have direct applicability.
  - Belgium transposed Capital Requirements Directive V (CRD V) by amending the Belgian Banking Law; Capital Requirements Regulation II (CRR II) is directly applicable.
  - EBA Guidelines are adopted in Belgium via NBB circulars (and, if needed, legal amendments).
- 2018 FSAP recommendations and follow-up (Paragraph 26):
  - 2018 FSAP recommended that NBB (and SSM) i) play a more active role in assessing loan classifications to ensure prudent provisioning; ii) continue enhancing reliability and consistency of internal models used to calculate regulatory capital; iii) strengthen regulation and monitoring of transactions with related parties.
  - 2018 FSAP recommended minimizing risks and unintended consequences of transitioning towards a banking union. Current FSAP reviewed implementation for LSI regulation and supervision and noted NCAs’ views on the transition.
- Supervision of Loan Classification and Internal Models (Paragraph 27–28):
  - EBA Guidelines on management of non-performing and forborne exposures (EBA/GL/2018/06) were adopted by the NBB in 2019 via circular.
  - EBA Guidelines on the application of the definition of default (EBA/GL/2016/07) were adopted by NBB in 2019 via circular.
  - EBA launched an IFRS 9 benchmarking exercise; pilot ran in 2019 and is becoming part of an annual benchmarking exercise.
  - FSAP review of inspection practices indicated Belgian authorities undertake corrective action when LSI banks deviate from appropriate classification practices.
  - Internal models recommendation mainly relevant for SSM; only 2 Belgium LSIs use internal models. NBB actively participated in SSM’s TRIM project for SIs; on-site inspections took place in Belgian banks and NBB expects same quality standards for the two LSIs.
- Related party and intragroup transactions (Paragraph 29–31):
  - Euro-Area framework (Paragraph 29):
    - Article 88.1 of CRD V requires data on loans to members of the management body (and parties related to them) to be documented and available to competent authorities upon request.
    - EBA Internal Governance Guidelines chapters 12.1 and 12.2 provide guidance.
    - Euro-Area related party framework is largely limited to members of the management body; loans to shareholders or intra-group exposures/transactions are not subject to Euro-Area related party framework (deviation from Basel Core Principles).
    - Broader set of related party transactions (IAS 24 definition) are subject to FINREP reporting (schedules F31.01 and F31.02) on a consolidated basis; intragroup exposures on an individual basis need to be reported (Schema A and COREP ALMM reporting).
  - Belgium framework (Paragraph 30):
    - Broader than CRD and EBA Guidelines; includes transactions with all (executive and non-executive) board members and shareholders (and parties related to them).
    - 2019 Belgian Banking Law modified scope to cover all transactions generating risk for the bank including with parent companies, subsidiaries, and sister undertakings.
    - Related party exposures with board members and shareholders (natural as well as legal persons) larger than EUR 500,000 are subject to annual NBB reporting.
    - Framework complemented with conflict of interest guidelines for decision making on related party transactions.
  - Intragroup exposures limits (Paragraph 31):
    - ECB exercised Article 400(2)(c) of the CRR to fully exempt intra-group exposures from large exposure limits where undertakings are established in the European Union.
    - NBB applies Article 493(3)(c) of the CRR and imposes stricter limits on intragroup exposures of Belgian banks to foreign parent companies and subsidiaries:
      - Foreign intragroup exposures cannot exceed 25 percent of the limits set out under the CRR and under no circumstances, 100 percent of Tier 1 capital.
      - Article applicable to all Belgian SIs and LSIs during the transitional period foreseen under the CRR — until 31 December 2028.
    - Belgian Banking Law requires approval of intragroup transactions that have strategic implications (see paragraphs 36 and 37).
- Euro-Area framework concerns (Paragraph 32–34):
  - Belgian authorities concerned about dilution of Basel III framework in Euro-Area adoption process; existing implementation proposals may propose further dilutions.
  - Concerns expressed by ECB; dilutions could undermine compliance with Basel capital and liquidity framework.
  - Increasing emphasis by SSM on group-level capital and liquidity requirements could result in lower capital and liquidity at subsidiary level; Belgian authorities emphasize maintaining sufficient capital and liquidity in cross-border subsidiaries until a common deposit insurance scheme and fiscal backstop for systemic events are in place.
  - Belgian authorities favor adopting a Euro-Area harmonized framework for third country branches (TCBs) to avoid undue risks and competition between SSM member jurisdictions (Paragraph 33).
  - Euro-Area branches need NBB approval to start operations in Belgium despite being subject to SSM notification; NBB can withhold approval in case of concerns (e.g., AML/CFT) and has done so on occasion (Paragraph 34).

### Belgian Macroprudential Powers
- Introduction and scope (Paragraph 35–36):
  - NBB is responsible for macroprudential supervision and measures for all banks (LSIs and SIs).
  - NBB powers include countercyclical capital buffer (CCyB), (sectoral) systemic risk buffers, and buffers for systemically relevant banks and other systemically important institutions.
  - At the time of the FSAP mission, imposed measures included a sectoral systemic risk buffer on retail residential real estate exposures for banks using IRB models which increases computed risk-weighted assets (RWAs) by 9 percent.
  - NBB has no explicit powers to set borrower-based measures but issued supervisory expectations on indicators (benchmarks) for mortgage issuance applying to banks and insurance companies: loan-to-value (LTV), debt-to-income (DTI) and debt-service-to-income (DSTI) ratios.
  - At the time of the FSAP mission the CCyB was not activated but shortly after the targeted review the NBB announced its reactivation.
- Strategic decisions and intragroup transactions (Paragraph 36 reference):
  - Macroprudential powers (such as on strategic decisions and intragroup transactions) provide context to microprudential framework and allow monitoring of SIs and influence prudential decisions under ECB/SSM responsibilities.

*Source: 1belea2023009 - 17. The EU Commission can initiate proposals for EU banking regulations, which require*

### 37. The Banking Law (article 77) requires prior authorization of strategic bank decisions,

### 1belea2023009 - 37. The Banking Law (article 77) requires prior authorization of strategic bank decisions,

### Authorization of strategic bank decisions and macroprudential input
- Article 77 of the Banking Law requires prior authorization of strategic bank decisions; the authorization process can also take into account macroprudential considerations.
- The requirement is applicable to all banks; SIs as well as LSIs.
- From a microprudential perspective the ECB is responsible for the authorization process of SIs.
- The NBB may also use this power from a macroprudential perspective for SIs and advise the SSM on the approval request.
- SIs are to submit a copy of their pre-approval file to the NBB as well; while taking into account NBB’s macroprudential perspective, ultimately the decision-making power for SIs is with the SSM/ECB.
- Definition and scope of “strategic decisions” (Belgium specific): decisions of a certain importance taken by a credit institution or an entity under its control that can have a global impact on the credit institution, including but not limited to:
  - acquisition or establishment of institutions;
  - setup of or participation in a joint venture;
  - establishment in another country;
  - new cooperation agreements with other institutions;
  - contribution or acquisition of portfolios or activities;
  - mergers or demergers;
  - decisions to acquire shares in a non-financial institution for an amount above EUR 250 million or for an amount exceeding 5 percent of the capital of the credit institution.
- Art. 3, 63 of the Banking Law: ‘the competent authority’ can specify via an NBB regulation which decisions should be considered ‘strategic’ (and therefore require prior authorization), taking into account the risk profile and the nature of the activities of the supervised entity.

### Intragroup safeguards and independent non-executive oversight
- NBB mechanism requires banks (including SIs) to have independent non-executive board members to evaluate intragroup transactions.
- Rationale: certain group-level decisions or practices can create intragroup conflicts of interest that should be identified and brought to governing bodies of the subsidiary and parent institution.
- For intra-group operations or transactions (including dividend distributions) that are potentially material to the subsidiary, the NBB Governance Manual requires:
  - necessary safeguard mechanisms; and
  - setup of an ad hoc committee of independent non-executive directors to issue an opinion to the board on the transaction.

### Belgian microprudential specificities: compliance with EBA Guidelines and deviations
- Belgium complies with most EBA Guidelines but declared non-compliance with certain parts of:
  - internal governance;
  - assessment of the suitability of members of the management body;
  - technical aspects of the management of IRRBB under the supervisory review process.
- A Governance Manual has been prepared to cover Belgian-specificities for NBB and ECB/SSM supervisors and is accessible for JST collaborators.

### Governance and Fit & Proper requirements — structure and key deviations
- For NBB regulated financial institutions Belgium has a one-tier Board system of which the majority should be non-executives.
- Belgian specificities:
  - requirement that all members of the management committee are members of the Board;
  - Banking Law requires that the chair of the Board is a non-executive director (not necessarily independent non-executive);
  - combination of chair of the board and chair of the management committee could be allowed if approved by the NBB (waiver possible but none granted).
- Areas where the framework could be enhanced:
  - Composition of specialized board committees: Belgian law and Governance Manual require committee members to be non-executive but (except audit) only require one independent non-executive; chairs of committees need not be independent non-executives.
  - Limit on number of committee memberships: one non-executive may not sit in more than three committees.
  - No prohibition on a single individual chairing both the risk committee and the audit committee and also chairing the board or other committees (contrary to EBA Guidelines); NBB treats this as a best practice rather than a requirement.
- Non-compliance with EBA Suitability Guidelines (two points, with proportionality arguments):
  - Calculation of number of directorships for time commitment: Belgian Banking Law counts several directorships in undertakings in which other entities of the banking group have a qualifying holding as one single mandate (EBA counts only directorships in entities in which the bank itself has a qualifying holding as a single mandate).
  - No supervisory suitability assessment required by the competent authority for the CFO when he/she is not part of the Board/Executive Committee of a significant CRD-institution (contrary to EBA Guidelines).
- Recommendations to strengthen supervisory guidance:
  - Provide more detailed guidance in the Governance Manual on expectations of the supervisory function of non-executive board members, including review of functioning and performance of executives and the Executive Committee.
  - Consider rewording the Governance Manual to allow more discretion in board reporting of control functions when concerns may be perceived as sensitive by the Executive Board, to avoid inhibiting control functions from communicating concerns to the board.
  - Take a more pronounced approach to conflicts of loyalty: avoid allowing an independent non-executive director at a parent company to also be considered independent at a subsidiary where conflict of loyalty may arise.

### Governance stricter than EBA in some respects
- Belgium applies stricter rules compared to EBA Guidelines in some areas:
  - Fit and proper reviews are conducted ex ante for new board members (NBB review before appointment).
  - Variable remuneration is capped at 50 percent of fixed remuneration (stricter than Article 94.1 (g) of Directive 2013/36/EU which allows 100 or 200 percent if shareholders approve). The Directive allows a more conservative cap.

### Recommendation for cross-sector application
- NBB should review whether governance and fit & proper observations and recommendations for banks are relevant for other regulated financial institutions, ensuring consistency while considering sectoral specificities.

### Interest Rate Risk in the Banking Book (IRRBB)
- Belgium declared non-compliance with the EBA Guidelines on Management of Interest Rate Risk Arising from Non-Trading Book Activities for sound prudential reasons, while fully complying with EBA/GL/2018/02.
- Belgium adopted a more conservative supervisory outlier test by imposing more restrictive limits on Non-Maturity Deposits (NMDs).
- EBA adopted a new regulatory package on IRRBB in October 2022 (standardized approach for behavioral modelling of NMDs and supervisory outlier tests set out under Regulatory Technical Standards).
- NBB will be obliged to revise its circular in 2023 to ensure full alignment with the EBA framework; the new package may be on average stricter for the Euro-Area than previous guidelines but is less strict than the current NBB approach.

### Supervisory approach for LSIs and SREP
- NCAs have considerable freedom to develop supervisory approaches for LSIs within SSM LSI oversight boundaries; ECB sets overarching boundaries (supervisory priorities, SREP methodology, joint supervisory standards, supervisory cycle) while allowing proportionality.
- A new SSM LSI classification regime entered into force on 1 January 2022:
  - Introduced categories: High-Impact (HI) LSIs and High-Risk (HR) LSIs, identified using separate impact and risk criteria.
  - At least three LSIs per country should be classified as HI (exceptions possible).
  - An LSI that is considered a small and non-complex institution (SNCI) within the meaning of CRR II cannot be designated as a high-impact LSI unless it is the largest LSI in a jurisdiction where all LSIs are SNCIs.
  - LSIs are classified as HR based on NCA risk assessment and compliance with capital and leverage requirements.
- The NBB uses the SSM SREP methodology for LSI supervision. SREP elements:
  - i) business model and profitability assessment;
  - ii) internal governance and risk management assessment;
  - iii) assessment of risks to capital and excessive leverage;
  - iv) assessment of risks to liquidity and funding.
- SREP practice at NBB:
  - Comprehensive SREP assessment covering all material risks at least every 3 years; for HI LSIs the comprehensive assessment is conducted annually.
  - If not part of annually planned comprehensive SREP, an institution’s SREP is updated offsite based on available information.
  - NBB uses the SSM tool to assign risk scores per SREP element and an overall global risk score per LSI (1 – 4).
  - NBB can consider certain risks as immaterial; option to apply a simplified approach to some material risks exists but has not been used.
  - For Pillar 2 requirement (P2R) calculation, NBB uses its own excel tool that calculates per risk element a capital add-on.
  - Offsite supervisors are responsible for SREP and consider prudential reporting, LSI documentation, on-site inspection findings, and other NBB documentation (e.g., horizontal thematic reviews) when scoring elements.
- Baseline supervisory work and planning:
  - SREP score determines baseline planning of meetings and frequency of assessment of: i) financial statements and audit reports; ii) bank’s internal risk report; iii) recovery plan; iv) management body; v) management body in its supervisory function; vi) senior management; vii) internal audit; viii) external auditor; ix) risk assessment frequency; x) SREP frequency.
  - Offsite and onsite annual planning further considers SSM priorities, planned benchmarking exercises, NBB priorities (Annual Risk Review), and SREP scores.
- SSM horizontal thematic reviews and benchmarking:
  - SSM/ECB regularly performs thematic reviews and benchmarking across SSM jurisdictions to promote convergence and share best practices.
  - Recent thematic reviews include: i) credit underwriting standards of LSIs; ii) material growth of LSIs; iii) financial holding company structures; iv) annual LSI horizontal SREP review; v) COVID-19 vulnerability analysis and follow-up credit risk workshops with NCAs; vi) deposit platforms; vii) LSI governance.
  - Thematic reviews on climate risk for LSIs, national stress testing practices, and credit risk expected to start in 2023.
- Monitoring and reporting:
  - NBB uses an excel based Quick Look Tool (QLT) for internal monitoring providing quarterly key financial indicators of LSIs and flags for SSM notification thresholds.
  - QLT could be enhanced by adding banks’ internal capital targets to monitored ratios.
  - Annually the TB Department submits a presentation with a global overview and SREP scores of LSIs for NBB Board approval and uses a tracking template to monitor planning progress.
  - NBB provides SSM with additional reporting (e.g., LSI annual report, monitoring of credit metrics, assessment of significance, ad-hoc reporting upon request).

### Supervisory resources and capacity
- Finding: LSI supervision staffing constraints affected the 2022 SREP exercise and internal SSM benchmarking.
- As a result of supervisory staff turnover and time needed to fill vacancies, SREP reviews planned for 2022 were delayed to 2023.
- Internal SSM benchmarking indicates staffing levels for LSI supervision at NBB are below SSM average.
- Recommendation: NBB should continue to ensure adequate prudential supervisory staffing for LSI supervision to avoid gaps in the supervisory work program.

*Source: 1belea2023009 - 37. The Banking Law (article 77) requires prior authorization of strategic bank decisions,*

### 58. The P2R appears well embedded in the supervisory processes and quantitative

### 1belea2023009 - 58. The P2R appears well embedded in the supervisory processes and quantitative

### P2R (Pillar 2 Requirements) and P2G (Pillar 2 Guidance)
- The NBB uses the SSM SREP methodology, but instead of an overall capital add-on complements it with an add-on per risk type.
- Since 2022 quantitative requirements have been complemented with qualitative ones.
- In line with SSM guidance the NBB has adopted since 2022 the approach to provide more qualitative recommendations and requirements to promote adequate risk management and oversight by the control functions.
- Until 2022 only limited number of LSIs received a P2G, but the NBB is in the process of adopting the SSM P2G approach in 2023.
- The NBB is in the process of implementing the SSM 2022 SI P2G bucketing approach, which it has calibrated for Belgian LSIs.
- The revised approach is expected to result in more LSIs receiving a P2G.
- In certain instances, proposals for changes to P2R requirements could be better motivated by taking into account a wider range of information (e.g., views of rating agencies and other market participants) and by explaining the link and potential implications that the change may have on the P2G.

### Interest, Liquidity and Climate risk
- The NBB carefully reviewed the main lessons learned from the recent banking sector turmoil (e.g., in the US and Switzerland) and how these are relevant for LSIs.
- The review of IRRBB is well embedded in the supervisory approach and SREP.
- In response to the market events early 2023, the NBB requested banks to regularly report the potential losses on held-to-maturity securities in case they would need to be sold against market prices.
- This reporting is particularly relevant as most of the securities that are held by LSIs are not accounted for mark-to-market valuations.
- The NBB is reviewing its approach to liquidity risk taking into account that until now there is no consolidated experience of setting Pillar 2 liquidity requirements.
- The recent market turmoil in the US and Switzerland has pointed the authorities to the necessity of reviewing this approach, which will also be further discussed in a Euro-Area context.
- Adequate monitoring of liquidity metrics is in place.
- With regard to climate change the NBB is in the process of considering how this could be best taken into account in the risk assessment and SREP.
- In developing its approach, the guidance issued by the ECB/SSM is taken into account.
- To create awareness the NBB has conducted and will continue conducting climate change risk survey among LSIs.
- As a first step, the results of these surveys could feed into qualitative SREP requirements to further awareness and stimulate LSIs to consider the impact of climate change could impact their clients and as its own risks and business model.

### Onsite Examinations
- Onsite examinations focus to a large extent on governance, control functions and credit risk.
- Governance inspections generally include a review of the risk, internal audit and compliance function, and to the extent practical also include AML/CFT aspects.
- The increased attention to governance is recognized in the relatively recent ECB/SSM thematic review of NCA’s work on governance.
- This responds to the recommendation in the previous FSAP to enhance the focus on risk management and control functions by strengthening the role of the board in its supervisory function.
- The attention on governance mitigates to some extent the weaknesses in the governance framework discussed elsewhere in the assessment.
- IT and cyber risk onsite examinations only took place the last 5 years at High Impact LSIs, while others were only subject to offsite review of provided information.
- Given the need for prioritization as a result of limited resources, non-HI LSIs are only subject to IT and cyber security risk reviews during the SREP process.
- In the context of the SREP the NBB sends out IT and cyber security risk questionnaires; results are reviewed offsite and where necessary complemented with a short visit of IT/cyber security supervisors.
- More resources allocated to LSIs could be required if these offsite reviews or other collected information point to the need for an onsite inspection.
- The NBB should ensure consistent practices across departments for documenting key supervisory decisions related to onsite inspections and their recommendations.
- The results of an onsite inspection and potential remedial actions are elevated to the Board when there is a 4 score but could also be warranted in other situations.
- Based on the onsite inspection findings and the resulting need for improvements, inspected LSIs submit an action plan to the NBB.
- In case the inspection found issues that pose a high risk, the NBB could use article 234 of the Belgian Banking Law and turn the action plan or a part of the action plan into a “remedial” action plan.
- From the documents reviewed during the FSAP it was not evident that the significance of the institution (e.g., for HI LSIs) and repeat findings were consistently taken into account in deciding on the level of decision making (e.g., elevation to the NBB Board) and the remedial action process.
- The NBB should ensure that practices for documenting the evaluation of an institution’s onsite inspection, the resulting action plan, and the approval of decisions for using or not using remedial actions are more consistently embedded in the processes across the relevant departments.

### Business Model Review
- The NBB demonstrated a good understanding of business models and incorporated any concerns in their supervisory approach.
- This observation is applicable to LSIs as well as TCBs.
- Where relevant the authorities provided evidence of addressing business model concerns effectively and were able to apply supervisory approaches resulting in orderly wind-down of activities of licensed banks as well as branches that decided to leave the market.

### Conduct and FSMA activities
- The FSMA has a well-developed framework for product and conduct supervision of banks.
- The FSMA has a well-developed MIFID risk assessment framework.
- For banks, the risk assessment brings together information on the size the retail investment activities/services, the scoring of the activities/services on the MIFID Cartography, review of relevant documents, and observed red-flags (e.g., client questions, number of complaints, news, whistleblowing, ombudsman).
- The key observations and results of the FSMA risk assessment could be useful for the NBB in its LSI supervision, as some of the collected information could point to weak governance, compliance or to IT problems (e.g., downtime of systems and resulting customer complaints).
- The FSMA is working on the introduction of a Banking Oath.
- A draft law has been approved by the Council of Ministers in April 2023 and has since been submitted to various bodies, including the ECB, and is under discussion in the Parliament.
- The Banking Oath will increase the awareness of individuals on their responsibilities and in the event of breaches they will be subject to disciplinary proceeding before the FSMA.
- The FSMA would also keep a register of disciplinary sanctions.
- The framework would make it more difficult for people that have been subject to disciplinary sanctions to continue a career in leading roles in the banking industry.

*Source: 1belea2023009 - 58. The P2R appears well embedded in the supervisory processes and quantitative*

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_Source: https://www.imf.org/-/media/files/publications/cr/2023/english/1belea2023009.pdf_