Conflicts of interest

  1. Banking Law: Articles 21, § 1, 3°, 72 and 73
  2. NBB Regulation:
  3. Relevant thematic NBB circulars:
  4. International reference documents:

The activity of an institution is characterised by a combination of various interests - often converging but just as often diverging or conflicting - which require appropriate rules.

Conflicts of interest may arise in - but are not limited to - the following relationships:

  • between shareholders and the institution;
  • between directors and the institution;
  • between staff and the institution and, by extension, the institution’s customers;
  • between the institution and its customers, as a result of the business model implemented and/or the various services and activities offered by the institution;
  • between customers;
  • between the institution and its parent undertaking, its subsidiary or other affiliated undertakings, in the context of intra-group transactions.

Without prejudice to the application of the provisions of the Companies and Associations Code or other specific applicable regulations (investment services, market abuse), two types of conflict of interest policies should be developed:

Conflict of interest policy at institutional level

The statutory governing body should be responsible for establishing, approving and overseeing the implementation and maintenance of effective policies to identify, assess, manage and mitigate or prevent actual and potential conflicts of interest at institutional level, e.g. as a result of the various activities and roles of the institution, of different institutions within the scope of prudential consolidation or of different business lines or units within an institution, or with regard to external stakeholders (including, where appropriate, entities where a director of the institution holds an external position).

For further information on the conflict of interest policy at institutional level, please refer to paragraphs 105 to 107 of Guidelines EBA/GL/2021/05.

Conflict of interest policy for staff

The statutory governing body should be responsible for establishing, approving and overseeing the implementation and maintenance of effective policies to identify, assess, manage and mitigate or prevent actual and potential conflicts between the interests of the institution and the private interests of staff, including members of the statutory governing body, which could adversely influence the performance of their duties and responsibilities and the institution’s activities.

The conflict of interest policy for staff should aim at identifying conflicts of interest of staff, including the interests of their closest family members.

For further information on the conflict of interest policy for staff, please refer to paragraphs 108 to 131 of Guidelines EBA/GL/2021/05.

The EBA Guidelines also contain a series of recommendations regarding "loans and other transactions with members of the management body and their related parties". These provisions should be read in conjunction with Article 72 of the Banking Law and Circular NBB_2017_21, which regulate the granting of loans, credits and guarantees to members of the statutory governing body and their related persons[1]. Please refer to point 3.3. of this Manual for more information on this subject.

General measures applicable to all types of conflicts of interest

The institution's measures to manage or, as the case may be, mitigate conflicts of interest should be documented. This should include, inter alia, the following measures and procedures:

  • put in place information barriers (Chinese walls) or separate certain departments physically or with regard to IT matters;
  • entrust conflicting activities within a chain of transactions or services to different persons;
  • entrust supervisory and reporting responsibilities relating to (potentially) conflicting activities to different persons;
  • avoid any direct link between the remuneration of the relevant persons and the revenues generated by conflicting activities;
  • avoid any situation where persons from within or outside the institution with a conflict of interests have an inappropriate influence on an activity of the institution;
  • establish an appropriate policy and procedures for transactions with related parties. This could include requiring, for example, that transactions be conducted at arm's length terms, that a binding opinion be given by independent members of the statutory governing body, that exposure to such transactions be limited, etc.;
  • provide that the members of the statutory governing body have a responsibility to abstain from voting on matters where they have or may have a potential conflict of interest, or where the objectivity or ability of the person concerned to perform the duties properly may be compromised;
  • limit the external activities of relevant persons.

It is a good practice to inform interested stakeholders of the general nature and sources of conflicts of interest and of the policy applied by the institution to identify, prevent or manage these conflicts. Please refer to paragraphs 108 to 131 of Guidelines EBA/GL/2021/05 for further information on the NBB’s prudential expectations regarding the content of this policy and the procedures for reporting and communicating conflicts of interest. For more information on this subject, please refer to Guidelines EBA/GL/2021/05, the NBB’s Fit & Proper Manual, the NBB Regulation of 9 November 2021 and Communication NBB_2022_19 on external functions and to Circular NBB_2017_21 on loans to managers.

 

[1] Article 72 of the Banking Law does not apply to (mixed) financial holding companies.