IMF Staff Country Reports

This paper assesses the stability of Belgium’s financial system. The financial sector remains resilient in the face of the rising cyclical vulnerabilities, but there is a need for closely monitoring risks. Stress tests on banks and insurance companies confirm that they can absorb credit, sovereign, and market losses in the event of a severe deterioration in macro-financial conditions. The risk of interbank contagion through direct exposures is low. Insurance companies are also generally resilient and the losses incurred by those that belong to banking groups do not threaten the soundness of those groups. Bank resilience reflects relatively healthy loan portfolios and limited exposure to market and liquidity risks, while insurance companies have sound solvency levels and reduced exposures to guaranteed rates.