Eight Belgian Banks redesignated as ‘systemically important institutions’
In its capacity as Macroprudential Authority, the Board of the National Bank of Belgium (NBB) has undertaken its annual review of the designations of domestic systemically important banks. The NBB has also reviewed the capital surcharges applied to them.
Domestic systemically important banks (O-SIIs) 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.
A score for each bank
The European Banking Authority (EBA) identification methodology for systemically important institutions, involves the calculation of a score for each institution, 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 institutions that were designated as O-SIIs in 2021, albeit sometimes at a higher consolidation level: KBC Group, BNP Paribas Fortis, ING Belgium, Belfius Bank, Euroclear Holding, The Bank of New York Mellon, Investeringsmaatschappij Argenta and Crelan (following the takeover of Axa Bank Belgium) [1].
Capital surcharges
For each of these O-SIIs, the NBB Board has also decided to maintain the capital surcharges announced in 2015. From 1 January 2023 onwards, the levels of the surcharges are as follows: 1.5% for KBC Group, BNP Paribas Fortis, ING Belgium and Belfius Bank; 0.75% for Euroclear Holding, The Bank of New York Mellon, Investeringsmaatschappij Argenta and Crelan (following the takeover of Axa Bank Belgium) [2].
These buffers are primarily structural. Any temporary release, against the background of a persistent crisis, would need to be coordinated with the national and international institutions concerned. If the need for additional support measures were to arise, release of these 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.