The Act of 25 April 2014 on the legal status and supervision of credit institutions (the Banking Act) was published in the Belgian Official Journal today.
The complete text of the Banking Act can be found here.
The Banking Act replaces the Act of 22 March 1993 on the legal status and supervision of credit institutions. The Banking Act lays down new rules, inter alia, on the supervision, resolution, and structure of banking activities. Most of its provisions enter into force starting today, but Article 422 postpones the entry into force of some major provisions (with regard to the “single supervisory mechanism” and the resolution of credit institutions, among others).
The Banking Act implements and also, in part, anticipates key EU legislative developments including:
- Regulation (EU) 1024/2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions (the “GTM Regulation”);
- The Capital Requirements Directive IV (Directive 2013/36/EU, the “CRD IV”) and the Capital Requirements Regulation (Regulation (EU) No. 575/2013, the “CRR”); and
- The Directive establishing a framework for the recovery and resolution of credit institutions adopted by the Council of the European Union on 6 May 2014 (the “BRR Directive”).
The Banking Act thus aims to reinforce the financial solidity of Belgian credit institutions by way of, inter alia, strengthening own funds, imposing stricter liquidity requirements and limits on distributions. It also puts a lot of emphasis on the solid and efficient organisation of credit institutions and hereto introduces a dual governance structure at management level, specialised committees within the board (audit committee, risk committee, remuneration committee and nomination committee), independent control functions, and strict remuneration policies (including limits on the amount of compensation, the form and timing for vesting and payment of variable remuneration, as well as reduction and claw-back mechanics).
The Banking Act also introduces a prohibition in principle of proprietary trading as from 1 January 2015. However, some proprietary trading activities are excluded from the prohibition mentioned in Article 119 of the Banking Act. Permitted proprietary trading activities (including market-making, hedging, treasury management, and long-term investments) are capped, and these type of activities must comply with strict requirements on reporting, internal governance, and risk-management.
The new Banking Act is accompanied by the following complementary legislation, also published in the Belgian Official Journal today (7 May 2014):
- The Act of 25 April 2014 on various provisions (the “Financial Omnibus Act”). This Financial Omnibus Act amends various other legislation after the introduction of the Banking Act;
- The amended Organic Law of 22 February 1998 on the National Bank of Belgium (the “Organic Law on the NBB”). This Organic Law on the NBB designates the National Bank of Belgium as Resolution Authority charged with the power to decide on the resolution of a credit institutions and the power to apply the appropriate resolution measures; and
- The Act establishing the mechanisms of a macroprudential policy and clarifying the specific tasks of the National Bank of Belgium within the framework of its mission to contribute to the stability of the financial system (the “Act on Macroprudential Policy”).