Financial Sector & Services Supervision: Still Evolving as Quickly as 15 Years Ago

The Act of 2 August 2002 on the supervision of the financial sector and financial services (“Loi relative à la surveillance du secteur financier et aux services financiers/ Wet betreffende het toezicht op de financiële sector en de financiële diensten”) (the "Financial Sector Supervisory Act”) was the result of many years of reflection and negotiation within and by the financial sector.

The Financial Sector Supervisory Act in 2002

At the time it was adopted, the Financial Sector Supervisory Act had four main objectives:

  • reallocation of powers between the authorities responsible for supervising financial markets and institutions;
  • modification of the decision-making process by the prudential regulatory authorities, namely the Banking and Finance Commission (“BFC”) and the Insurance Control Office (the “ICO”);
  • organization of appeal proceedings, including against BFC and ICO decisions; and
  • reinforcement of cooperation between the three financial sector supervisory authorities, i.e. the BFC, the ICO and the National Bank of Belgium (“NBB”).

Impact of the 2008 financial crisis on the Financial Sector Supervisory Act

Having three authorities responsible for supervising the financial sector proved to be inefficient. Therefore, in 2004, the ICO and the BFC were merged to form the Banking, Finance and Insurance Commission ( “BFIC”).

Four years later, in 2008, the unthinkable happened. Like other regulators, the BFIC had not predicted and could not have prevented the worldwide financial crisis, and both the markets and consumer confidence were terribly weakened. Thus, in 2011, the supervisory structure of the Belgian financial sector was completely overhauled as a preventive measure.

The supervisory structure of the financial markets was modified to reflect the so-called Twin Peaks model. The Twin Peaks model distinguishes between prudential regulation of financial institutions and the supervision of financial markets and consumer protection.

The Financial Sector Supervisory Act today

The content of the Financial Sector SupervisoryAct has not changed significantly. The Act still deals with the same topics as in 2002, but certain provisions have been refined to better protect market integrity and consumers. One example is the introduction of a compliance officer (“CO”) requirement. This person is responsible for ensuring that the company conducts its business in full compliance with all applicable rules and regulations while taking into account the professional standards and business practices specific to the company’s sector as well as ethical considerations. A CO was already required in 2002 for credit institutions, but in the meantime the requirement has been extended to other types of financial institutions and the CO has been entrusted with new areas of responsibility, such as the MiFID implementing rules.

That being said, the most important changes since 2002 relate to the supervisory authorities themselves and their powers. In this regard, it should be noted that the Financial Sector Supervisory Act covers only the powers of the Financial Services and Markets Authority ("FSMA"), which replaced the BFIC in 2011. The NBB exercise its powers pursuant to Act of 25 April 2014 on the legal status and supervision of credit institutions and stock brokerage firms (the “Banking Act “).

Fifteen years after the entry into force of the Financial Sector Supervisory Act, supervision of the financial markets is exercised exclusively by two authorities:

  • The NBB is responsible for supervision of the most important financial institutions (mainly banks, stock brokerage firms, insurance companies and payment institutions). Pursuant to the Banking Act, the NBB oversees the solvability, liquidity and efficiency of such institutions.
  • The FSMA is responsible for supervising financial markets and their actors in order to protect market integrity and investors. Together with the Federal Public Service for the Economy, the FSMA  is also entrusted with consumer protection. Finally, it supervises specific financial institutions such as intermediaries, credit providers and portfolio management and investment advisory firms.

The NBB and the FSMA appear to cooperate well and have the necessary tools to render their actions effective. 

Powers of the supervisory authorities

Both the FSMA and the NBB have preventive and dissuasive tools to ensure the effectiveness of their powers, found respectively in the Financial Sector Supervisory Act and the Banking Act.

From a preventive point of view:

  • The NBB exercises permanent oversight over financial institutions which require NBB approval in order to exercise their activities.
  • Since 2014, the FSMA can rely on the very efficient tool of mystery shopping to check if financial institutions comply with the applicable conduct of business rules (e.g. to determine if a financial institution provides complete, relevant and honest  information concerning its financial products and services to its clients).

From a dissuasive point of view,

  • Both the NBB and the FSMA can impose administrative fines in their respective areas of responsibility but must consult one another before taking a decision against a financial institution.
  • The system of administrative fines appears to be effective: many companies end up by accepting a settlement with the FSMA and there are few appeals.


Fifteen years later, the Financial Sector Supervisory Act has evolved to reflect changes in the supervisory structure resulting from the financial crisis and the European legislature's wish to better protect consumers (see MiFID II, which was transposed in Belgian law by the Act of 21 November 2017 on the infrastructure of financial instruments, and the Market Abuse Regulation).

Special thanks to Mary-Noël Dochy (Head of Legal & Compliance, Keytrade Bank - Belgian branch of  Arkéa Direct Bank SA (France)), a former PSL Corporate & Finance with the firm, for writing this article.

Voir aussi : NautaDutilh


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