In light of the ongoing financial crisis and the difficulty of imposing adequate measures on financial institutions, the Belgian government submitted to Parliament on 5 February 2010 three bills containing measures designed to structure the recovery of the financial sector and overhaul governmental oversight of financial activities and institutions.
In this way, Belgium is following in the footsteps of England and Germany, both of which also enacted measures to allow the government to force financial institutions to sell assets or securities, under certain circumstances.
The bills were approved by the House of Representatives on 25 March 2010 and by the Senate on 6 May 2010, just before a governmental crisis prompted the dissolution of Parliament.
Financial stability measures: new possibilities for government intervention
Two of the bills are intended to strengthen the measures that the Banking, Finance and Insurance Commission (CBFA) or the government can take with respect to seriously weakened banks or financial institutions whose situation constitutes a threat to national or international financial stability. The bills implement the measures announced in the 2009-2010 general policy statement of 13 October 2009.
The key features of the first bill can be summarised as follows:
- the CBFA will have the power to suspend immediately, in whole or in part, the activities ofa credit institution or insurance company which is subject to its supervision, without firstgranting it a period in which to take corrective action;
- the government will be able, by means of a royal decree, to order the transfer, sale orcontribution to the state or to any other Belgian or foreign individual or (public or private)legal entity of (i) assets, liabilities or one or more branches of activity of a credit institutionor (ii) voting or non-voting securities issued by a credit institution (regardless of whetherthey represent capital). This power can only be exercised in the event of a critical situationwhich poses a "serious risk to the continuity" of the credit institution and which is liable toundermine financial stability;
- new sanctions will be set for the spread of false or misleading information or of rumours that could affect the financial stability of a credit institution, insurance company orsettlement institution.
The second bill sets out the procedure to be followed for the required prior judicial review by the Brussels Court of First Instance (Rechtbank van eerste aanleg/Tribunal de première instance) of certain of the orders referred to above. The court will determine whether the proposed transaction is lawful and, where applicable, whether the proposed compensation is fair and equitable. This procedure is intended to avoid problems such as those which arose in the Fortis case.
Supervision of the Belgian financial sector
The third bill puts in place a new institutional structure to supervise financial institutions and markets in Belgium. The new structure will follow the so-called Twin Peaks model.
The bill, which amends the Financial Markets Supervision Act and the Act on the Status of the National Bank of Belgium, follows a trend, noted in several other eurozone countries, of consolidating the micro- and macro-components of prudential supervision.
The first stage in the reorganisation of the Belgian regulatory structure will be the creation of a Systemic Risk Committee (Comité voor systeemrisisco's en systeemrelevante financiële instellingen/Comité des risques et établissements financiers systémiques), made up of the NBB's and the CBFA's management committees. This committee will oversee the gradual consolidation of the NBB and the CBFA teams involved in prudential supervision.
The committee will be an autonomous body with legal personality, entrusted with ensuring the stability of the financial system. The committee will be able to take administrative measures (such as the imposition of penalties) against systemic institutions (i.e., those able to exert an influence on the financial system) and oppose strategic decisions taken by such institutions if it is of the opinion that the decision could have a negative impact on the financial system as a whole or would go against prudent management.
Once the overhaul is complete, the NBB will be responsible for all prudential supervision in Belgium. The post-reform CBFA will be in charge of supervising the financial markets (including listed companies and financial products, services and intermediaries) and will be given increased powers as regards consumer protection and financial information.
The committee will work together with the European Systemic Risk Board (Europees Comité voor Systeemrisico's/Comité européen du risque systémique), which is in charge of implementing the European macroprudential control plan to detect and evaluate risks to the stability of the financial system as a whole. The EU Member States and the national regulatory authorities will have to implement the measures indicated by the ESRB in response to potential systemic risks or explain why they are unable to comply in a given case (the "comply or explain" principle).
The three acts have yet to be published in the Belgian State Gazette. Furthermore, these reforms can only be implemented once the required royal decrees have been issued, which will not occur until after the upcoming elections. To be continued.
