Belgium: Financial Sector Assessment Program-Technical Note on Macroprudential Policy Framework and Tools
IMF Staff Country Reports, December 8, 2023
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Bibliographic details
- Published: December 8, 2023
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798400262340.002
Executive findings
- The macroprudential policy framework in Belgium could be strengthened along several dimensions.
- Communication by the National Bank of Belgium (NBB) on some macroprudential tools is strong but is hampered for other instruments by the need to obtain government approval before decisions can be conveyed to a wider audience.
- The NBB should strengthen its systemic risk assessment framework by closing gaps and ensuring stronger integration of data and quantitative tools with instrument design and selection.
- A more holistic and structural approach should be contemplated to better gauge the transmission of macro-financial risks to individual financial intermediaries and to better detect financial sector spillovers.
- In view of the sizeable exposures of banks to Commercial real estate risk, a dedicated buffer to absorb potential losses if credit impairments materialize should be contemplated once the necessary elements for appropriate Sectoral systemic risk buffer calibration are in place.
Policy recommendations
- The government should publish its rationale for macroprudential policy decisions, including in the case of inaction to enact such instruments through Royal decree.
- The NBB should close gaps in its systemic risk assessment framework and ensure stronger integration of data and quantitative tools with instrument design and selection.
- Contemplate a more holistic and structural approach to better gauge transmission of macro-financial risks to individual financial intermediaries and detect financial sector spillovers.
- Consider switching to a positive neutral rate to facilitate Countercyclical capital buffer activation in an environment of repeated economic shocks and high macro-financial uncertainty.
- Consider establishing a dedicated buffer for Commercial real estate exposures once the prerequisites for appropriate Sectoral systemic risk buffer calibration are in place.
Analytical gaps and tools
- Current limitations in communication arise from the legal requirement to obtain government approval before conveying decisions on some instruments to a wider audience.
- The systemic risk assessment framework requires:
- Closing existing gaps in data and analysis.
- Stronger integration of quantitative tools with instrument design and selection.
- A holistic approach to map macro-financial risk transmission and detect spillovers across financial intermediaries.
Risks and scenario considerations
- Repeated economic shocks and high macro-financial uncertainty can complicate Countercyclical capital buffer activation under the current setup; switching to a positive neutral rate could facilitate activation.
- Sizeable bank exposures to Commercial real estate imply potential for material credit impairments, warranting consideration of a dedicated Sectoral systemic risk buffer once calibration elements are in place.
Belgium: Financial Sector Assessment Program-Technical Note on Macroprudential Policy Framework and Tools, IMF Staff Country Reports, December 8, 2023.
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