Member Article

The Royal Decree of 3 March 2011 regarding the evolution of the supervisory architecture of the financial sector (“Koninklijk besluit betreffende de evolutie van de toezichtsarchitectuur voor de financiële sector” / “Arrêté royal mettant en
oeuvre l'évolution des structures de contrôle du secteur financier”) (the “Royal Decree”) entered into force. This
Royal Decree implements the so-called “Twin Peaks” structure for the supervision of the financial sector, as introduced by  the Belgian Law of 2 July 2010 (the “Twin Peaks Law”).

The “Twin Peaks” supervisory structure, as implemented in Belgium, divides competences functionally between two supervisory financial authorities:  the National Bank of Belgium (“Nationale Bank van België” / “Banque Nationale de Belgique”) (the “NBB”) and the Financial Services and Markets Authority (“Autoriteit voor financiële diensten en Markten” / “Autorité des services et marchés financiers”) (the “FSMA”), formerly known as the Banking, Finance and Insurance Commission (“Commissie voor het Bank-, Financie- en Assurantiewezen” / “Commission bancaire, financière et des assurances”) ( the “CBFA”).

Both supervisory financial authorities perform a transversal supervision across the different financial sectors. Most of the micro-prudential powers of the FSMA have been transferred to the NBB.

As a result, the NBB has now become the principal prudential supervisor for the Belgian financial community on both a macro- and a micro-level. The NBB has to ensure that the financial institutions are properly organised
and maintain appropriate levels of solvency, liquidity and profitability.

The FSMA remains the supervisor for financial markets, investment products and of the rules of conduct that apply to financial institutions.

The Committee for Systemic Risk and System-relevant Financial Institutions (“Comité voor systeemrisico's en systeemrelevante financiële instellingen” / “Comité des risques et établissements financiers systémiques”) (the “CSRSFI”)
has been abolished and its powers have been transferred to the NBB and the FSMA.

2.         Main competences of the NBB

2.1       Ensuring financial stability

The NBB is responsible for ensuring economic stability in Belgium by:

(i)           
screening the markets for possible threats to the stability of the financial system;

(ii)         
advising the Belgian government and parliament on measures to ensure financial stability;

(iii)        
co-ordinating the management of financial crises; and

(iv)       
co-operating with European and international institutions and organisations (in particular with the European
Systemic Risk Council) with respect to (i), (ii) and (iii).

2.2       Macro-prudential supervision

The NBB also performs macro-prudential supervision of “system-relevant” financial institutions. These institutions include large credit institutions, financial holding companies, insurance companies, insurance holding companies and other financial players. The NBB decides which financial institutions are “system-relevant”.

As the macro-prudential supervisor, the NBB is empowered to oppose strategic decisions made by system-relevant
financial institutions that are not compatible with a healthy and prudent policy or that may have a severe negative impact on financial stability. The NBB may also take specific measures against system-relevant financial institutions (i) whose risk profile is inappropriate or (ii) whose strategic evolution may negatively impact the financial sector.

In contrast to the supervisory powers listed under 2.1 (Ensuring financial stability), this macro-prudential supervision of system-relevant financial institutions affects individual institutions.

2.3       Micro-prudential supervision of financial institutions authorised to hold funds on behalf of their clients

The NBB is responsible for the individual prudential supervision (including compliance with anti-money laundering legislation) of the following financial institutions authorised to hold funds on behalf of their clients:

(i)           
credit institutions (including financial services groups);

(ii)         
investment firms that have the status of stockbroking firms;

(iii)        
(re)insurance companies;

(iv)       
clearing institutions;

(v)         
settlement institutions and equivalent institutions;

(vi)       
payment institutions;

(vii)       electronic money institutions; and

(viii)     surety companies.

2.4       Recognised account holders

The NBB supervises account holders for dematerialised securities for government debt.

The NBB is also responsible for the supervision of compliance by the recognised account holders with the rules in, or pursuant to, the Belgian Companies Code.

3.         Main competences of the FSMA

3.1       Financial markets and financial products supervision

The FSMA supervises financial markets and market operators and is responsible for (i) the protection of the interests of investors with respect to transactions in financial instruments, (ii) compliance with the rules on the issue of securities and public takeover bids, (iii) compliance with the rules applicable to listed companies (including financial reporting) and (iv) the good functioning, transparency and integrity of the markets (including preventing and sanctioning
insider trading and market abuse).

In addition, the FSMA contributes to the enforcement of the rules that aim to protect depositors and investors against unlawful offering or delivery of financial products or services. The FSMA may issue regulations prohibiting or restricting the marketing of certain financial products to retail investors or enhancing transparency of pricing, fees and costs associated with financial products offered to retail investors.

3.2       Full supervision over certain financial actors

The FSMA remains the only supervisory authority for financial institutions which are not authorised to hold clients’ funds and certain other financial actors.

The FSMA fully supervises:

(i)           
portfolio management and investment advice companies;

(ii)         
undertakings for collective investment;

(iii)        
management companies of undertakings for collective investment;

(iv)       
currency exchange offices;

(v)         
companies and operations referred to in the Law of 4 August 1992 on mortgage credit;

(vi)       
companies and operations referred to in the Law of 12 June 1991 on consumer credit;

(vii)       intermediaries in the (re)insurance sector;

(viii)     intermediaries in banking and investment services; and

(ix)        
institutions for occupational retirement provision.

3.3       Supervision of the rules of conduct

The FSMA supervises compliance by financial institutions (whether or not they are authorised to hold funds on behalf of their clients) with rules of conduct that aim to ensure a loyal, fair and professional treatment of investors, clients and other
interested parties.

The Law of 2 August 2002 on the supervision of the financial sector and on financial services lists the rules of conduct that fall under the scope of this supervision by the FSMA. This list may be further extended by royal decree and may include rules in relation to information requirements, terms and conditions of contracts, provision of services via the internet, marketing, complaints procedures, transparency in prices, commissions and fees and the availability
of services.

A royal decree may also apply different rules to financial services provided to professional clients and interested parties from those covering financial services provided to non-professional clients or interested parties. A distinction may also be made between different categories of professional clients and interested parties.

With respect to the rules of conduct, the FSMA also supervises certain aspects of the internal mechanisms of financial institutions authorised to hold clients’ funds, such as internal policies, procedures to be applied in case of conflicts of
interest and measures to preserve the continuity of the business.

3.4       Pensions

The FSMA is still the competent prudential supervisor for institutions for occupational retirement provision. The Royal Decree transfers this responsibility from the FSMA to the NBB, but this particular provision has not yet entered into force. The NBB and the FSMA will report to the King by 31 December 2013 on this subject.

The FSMA continues to supervise compliance with social legislation in the field of occupational retirement provision (second pillar). This applies not only to institutions for occupational retirement provision, but also to insurance companies active in the field of occupational retirement provision (second pillar).

3.5       Financial education of the public

The FSMA is responsible for contributing to the financial education of savers and investors.

3.6       Securities Regulation Fund

The supervisory powers exercised by the Securities Regulation Fund (“Rentenfonds” / “Fonds des Rentes”) over  transactions on the government debt market will be transferred to the FSMA. The FSMA will also supervise the transaction information submitted by market participants to the Debt Agency (“Agentschap van de Schuld” / “Agence de la Dette”).

4.         Licences, registrations and admission

4.1       General

The NBB is the licensing authority for the financial institutions which fall under its prudential supervision, but the FSMA will advise the NBB on matters which fall within the scope of its competencies. The FSMA remains the licensing authority for all  other financial institutions.

Decisions by the NBB or the FSMA to refuse, revoke or suspend a licence, registration or admission can be appealed against to the Council of State (i.e. the Belgian supreme administrative court).

4.2       Cross-border activities

Generally, the same division of competences between the supervisors applies to the supervision of foreign insurance companies, credit institutions and investment firms active in Belgium.

The NBB is responsible for the prudential supervision and authorisation of new branches or services of foreign insurance  undertakings, credit institutions and investment firms that have the status of stockbroking firms active in Belgium.

As a rule, the FSMA supervises compliance by foreign insurance companies with the rules of conduct in Belgium. The  supervisory powers of the FSMA regarding compliance with the rules of conduct by credit institutions and investment firms  that have the status of stockbroking firms performing cross-border activities depends on whether such activities are  performed through the mere provision of services or through the establishment of a branch.

5.         Preventative work and sanctions for breaches

The NBB and the FSMA are each empowered to undertake activities aimed at preventing breaches of the rules they  enforce and to impose sanctions on organisations which breach these rules. Certain mechanisms (for example the  exchange of information) have been put in place to co-ordinate the actions taken by the FSMA and the NBB in relation to  financial institutions falling under the prudential supervision of the NBB.

Decisions by the NBB or the FSMA to impose a penalty payments or administrative fines can be appealed against to the  Court of Cassation (i.e. the Belgian supreme civil court).

6.         Co-operation between the supervisors

The Royal Decree contains numerous provisions on the co-operation between the NBB and the FSMA. Among other things,  it imposes a duty on them both to exchange information and to consult each other. In order to preserve the  expertise that had been built up within the FSMA and the NBB with regard to their former competencies, the Royal Decree  further requires key members of staff to be transferred from the NBB to the FSMA.

7.         Applicability in time

Most of the provisions of the Royal Decree came into force on 1 April 2011.

The most notable exceptions are (i) the transfer of the FSMA’s prudential supervisory powers for institutions for  occupational pensions to the NBB (as it has not yet been decided whether or not these supervisory powers will be  transferred) and (ii) the transfer of certain supervisory powers currently exercised by the Securities Regulation Fund  (“Rentenfonds” / “Fonds des Rentes”) to the FSMA (a new royal decree will determine when these powers will be  transferred).

Requests that were filed with the former CBFA before this date will remain valid and will be dealt with by the NBB. All  decisions that were made by either of the institutions before the reform will remain in force.