Banque nationale de Belgique : Eight Belgian banks redesignated as “systemically important institutions”

In its capacity as the macroprudential authority, the Board of Directors of the National Bank of Belgium (NBB) has carried out its annual review of the designation of domestic systemically important banks. The NBB also reviewed the additional capital requirements applicable to these institutions.

Domestic systemically important institutions (O-SIIs) are defined as those whose failure would have a significant impact on the financial system or the real economy. There are two main reasons for the additional capital requirements applicable to such institutions:

1. to reduce the probability of default by these institutions, given the high economic and social costs this would entail;
2. to impose buffers on the institutions that reflect the negative externalities their failure would generate.

A score for each bank

The European Banking Authority (EBA) methodology used to identify systemically important institutions involves calculation of a score for each institution, based on quantitative indicators related to size, complexity, interconnectedness and substitutability (the ability of other institutions to rapidly replace critical services). In 2023, the application of this methodology resulted in the redesignation of eight Belgian institutions as O-SIIs: KBC Group, BNP Paribas Fortis, Euroclear Holding, ING Belgium, Belfius Bank, The Bank of New York Mellon, Investeringsmaatschappij Argenta and Crelan.^[1]

Capital buffers

For seven of these O-SIIs, the NBB's Board of Directors has decided to maintain the capital buffers announced in 2022. For Euroclear Holding, it has been has decided to increase the CET1 buffer due to a strong increase in the size of its balance sheet. As from 1 January 2024, the following buffers will thus apply: 1.5% for KBC Group, BNP Paribas Fortis, Euroclear Holding, ING Belgium and Belfius Bank and 0.75% for The Bank of New York Mellon, Investeringsmaatschappij Argenta and Crelan. ^[2]

These buffers are primarily structural in nature. Any temporary release, against the backdrop of a persistent crisis, would need to be coordinated with the national and international authorities concerned. Should the need for additional support arise, release of these buffers would likely be one of the last macroprudential tools used.

^[1]As it is subject to the specific requirements of an EU restructuring plan, Dexia was not included in the list of institutions on which an O-SII buffer is imposed.

^[2]Without prejudice to the caps referred to in Article 14 §5 of Annex IV to the Belgian Banking Act.