Eight Belgian banks renewed as systemically important institutions

In its capacity as Macroprudential Authority, the National Bank of Belgium (NBB) Board has undertaken its annual review of the designations of domestic systemically important banks The NBB has also reviewed the capital surcharges applied to the Belgian systemically important institutions (O-SIIs).

Given that systemically important banks are defined as institutions whose failure would have a significant impact on the financial system or the real economy, additional capital requirements for such institutions have two principal motivations: (1) to reduce the probability of default of the institution, given the high economic and social costs of such a default; (2) to impose surcharges on the institution that reflect the negative externalities that its failure would generate.

The European Banking Authority (EBA) identification methodology for systemically important banks involves calculation of a score for each bank based on quantitative indicators of size, complexity, interconnectedness and substitutability (the ability of other institutions to rapidly replace critical services). The application of the methodology has resulted in the renewed O-SII designation of eight Belgian banks that were designated as O-SIIs in 2020: BNP Paribas Fortis, KBC Group, Belfius Bank, ING Belgium, Euroclear, The Bank of New York Mellon, Argenta and Axa Bank Belgium [1].

For each of these O-SIIs, the NBB Board has decided to maintain the capital surcharges announced in 2015. The levels of the surcharges are as follows: 1.5% for BNP Paribas Fortis, KBC Group, Belfius Bank and ING Belgium; 0.75% for Euroclear, The Bank of New York Mellon, Argenta and Axa Bank Belgium [2].

While the ongoing crisis has led to the release of certain macroprudential capital buffers, O-SII buffers are primarily structural and any temporary release would need to be coordinated with the national and international institutions concerned. If the need for additional support measures were to arise, release of the O-SII buffers would likely be one of the final macroprudential tools used.

[1] Being subject to the specific requirements of an EU restructuring plan, Dexia has not been included in the list of institutions covered by this surcharge.

[2] Without prejudice to caps implied by Article 14§5 of Annex IV of the Belgian Banking Law.