Our country plays a key role in the global financial landscape. Belgium hosts a number of international financial market infrastructures (FMIs) such as SWIFT and Euroclear, which act as critical nodes in the smooth functioning of Belgian and international financial markets and payment services.

As these institutions play an important but niche role in securities markets and international payments, they were not widely known to the general public… until they became headline news due to the Russian invasion of Ukraine and in particular the sanctions that were imposed as a result.

The NBB’s Financial Market Infrastructures and Payment Services Report provides an overview of the role that FMIs, custodians, payment service providers and critical service providers play, and the supervision and oversight that the NBB exercises on them. In addition, the Report contains an overview of the regulatory changes and supervisory activities in 2021 with regard to these institutions.

This year’s Report focuses on two types of risk : operational risk (including IT and cyber risks), and environmental and climate-related risks.

In order to guarantee financial stability, these critical players need to manage their operational risk very carefully. Digital operational resilience was therefore one of the NBB’s top priorities again in 2021. The Report provides an update on the proposed EU Digital Operational Resilience Act (DORA), which aims at mitigating the risks associated with the digital transformation of the financial industry by imposing strict common rules. These rules would apply to a wide range of financial institutions, plus critical IT third-party service providers, for example cloud service providers, who would be subject to a form of European oversight. A thematic article on digital operational resilience also includes some observations from recent on-site IT inspections.

The increased use of technology does not only create risks ; it also provides business opportunities for some entities. Emerging technologies such as distributed ledger technology (DLT) are closely monitored by the authorities in order to assess their potential impact on financial stability. The EU’s Markets in Crypto-Assets Regulation (MiCA), for example, aims at ensuring a level playing field for consumer protection, market integrity, financial stability, monetary policy transmission, and monetary sovereignty. In October 2021, with these concerns in mind, the Eurosystem started the investigation phase on the subject of a central bank digital currency (CBDC). Over the next two years it should determine whether to issue a digital euro, and what it would look like. A thematic article on DLT also includes a discussion on the benefits and challenges of the “tokenisation” of securities and the regulatory responses, such as the EU pilot regime.

Environmental and climate-related risks

Environmental and climate-related risks are another type of risk that has been receiving increased attention at the NBB and in the wider society. While FMIs may not be exposed to climate risk in the same way as, for example, insurers that insure damage caused by extreme weather events, the entities active in custody, payments and financial messaging need to manage this type of risk carefully as well. One of the environmental and climate-related risk categories identified by all types of entities covered by this report is physical risk from natural disasters, and extreme weather events interrupting the services delivered by the institution itself or by one of its service providers. Moreover, just as SWIFT acts as a facilitator to enhance its clients’ cyber security with its Customer Security Programme (CSP), institutions in the custody, payments and financial messaging sectors believe that they can play a positive role in helping the financial community to tackle environmental and climate-related risks, in addition to reducing their own CO₂ emissions. A dedicated thematic article provides a first introduction to environmental and climate-related risks within the FMI landscape.