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Asset management and NBFI are important components of the future European Savings and Investment Union (SIU). The NBB and the FSMA closely monitor the risks associated with these activities in Belgium

Press release
A woman consults financial data on a computer screen

The National Bank of Belgium (NBB) and the Financial Services and Markets Authority (FSMA) today published an update of their report on asset management and non-bank financial intermediation in Belgium. The NBB and the FSMA consider that the risks associated with these activities in Belgium are currently limited. However, a number of events and incidents in other countries point to vulnerabilities that need to be addressed. International organisations such as the FSB and IOSCO have published recommendations and policy proposals to that end. A further follow-up of this work is essential, also in light of the further development of the European Savings and Investment Union.

In 2017, the FSMA and the NBB published a first comprehensive report on asset management and non-bank financial intermediation in Belgium. The fifth update of this report, which includes recent figures and an analysis of major national and international developments, is now available. 

The main objective of this joint report is to keep a finger on the pulse, paying particular attention to the risks associated with these activities and their interconnectedness with other sectors.

A risk-based approach to delineate the NBFI sector

'Non-bank financial intermediation' or 'NBFI' may refer to a very diverse set of entities and activities outside the banking system. In a broad context, NBFI may refer to entities such as insurance companies, pension funds, investment funds and central counterparties, as well as to less or non‑regulated entities such as family offices. 

In this report, the NBB and the FSMA adopt a risk-based approach to delineate the NBFI. The focus is on a narrower subset of NBFI: entities involved in credit intermediation activities that may pose bank-like financial stability risks, notably because they use leverage or are involved in liquidity transformation. Several methods can be used to narrow down the sector and estimate its size. According to the method proposed by the FSB, the sector amounted to €172 billion in assets at the end of 2023. 

Furthermore, the report pays specific attention to asset management. 'Asset management' refers to the segment of the financial industry that is involved in the management of financial assets on behalf of investors. The focus is on collective management through investment funds, although asset management may also comprise the discretionary management of an individual investor’s portfolio. At the end of 2023, Belgian investment funds accounted for €215 billion in net assets, while Belgian asset managers had roughly €208 billion in assets under management.

Developing of the European Savings and Investments Union (SIU)

A well-developed, diversified and resilient financial sector is vital to ensure stable financing of the real economy and to meet the needs of savers and investors. For companies, governments and households, financial intermediation outside the banking system may provide a source of funding that is a valuable alternative to credit supply by banks. At the same time, it offers them broader investment opportunities. 

Strengthening the single market is high on the agenda today to help meet the financing needs of the European economy within the context of geo-economic developments and climate change. The development of the European Savings and Investments Union (SIU) may lead to the transfer of savings from bank accounts to long term investments in capital markets.

These developments reinforce the importance of financial stability and consumer protection in the NBFI sector.

Size of the sector limited compared to other developed countries 

At the end of last year, the FSB also published its annual report on non-bank financial intermediation. According to FSB estimates, the size of the global NBFI sector reached $70.2 trillion.

Compared to other countries, the size and importance of the Belgian non‑bank financial intermediation sector is limited. The sector accounts for less than 0.5% of the global aggregate and around 1% of the total for EU countries. Whereas the sector accounts for 98% of GDP in other developed economies, the estimate of €172 billion in assets in Belgium accounts for only 29% of GDP.

These are mainly assets held by investment funds that do not qualify as equity funds. The vast majority of these funds are subject to supervision by the Belgian authorities.

The relatively limited size of the non-bank financial intermediation sector in Belgium confirms that credit intermediation is still dominated by banks. It also reflects a relatively strong interconnectedness of Belgian entities with non-bank financial intermediation outside Belgium, particularly in other European countries.

International cooperation is crucial

A number of events and incidents in other countries, such as the failure of the Archegos family office in 2021 and the tensions in the British gilt market in 2022, have provided evidence of vulnerabilities in the NBFI sector. Most of these relate to liquidity, the use of leverage and interconnectedness within the financial system. 

To identify and address vulnerabilities, and thus promote financial stability, international organizations such as the FSB and the International Organization of Securities Commissions (IOSCO) developed a comprehensive work programme. They have already published recommendations and policy proposals in this respect. 

In Europe, the European Systemic Risk Board (ESRB) and the European Securities and Markets Authority (ESMA) carried out analytical and policy work on NBFI while the European Commission launched a targeted consultation to seek views on the macroprudential framework for NBFI.

In Belgium, the NBB and the FSMA did not identify material risks arising from the size and nature of non-bank financial intermediation in Belgium or from the interconnectedness of Belgian entities with NBFI entities outside Belgium, but they do highlight the importance of the European and international regulatory framework to safeguard financial stability.

The NBB and the FSMA therefore continue to actively participate in international work to gain a better view of European and global developments in the NBFI sector and, where necessary, to strengthen the regulatory framework.

NBB Governor Pierre Wunsch: 'The NBB-FSMA report confirms that the Belgian asset management and non-bank financial intermediation market can be considered fundamentally sound. The sector remains thus well‑armed to face a challenging environment and provides a solid foundation to help enable the envisioned strengthening of the future European Savings and Investment Union. This solid starting position must be maintained in order to secure the crucial role of this sector in financial intermediation in Belgium also in the future.  Given the rapid developments in this sector, supervisory authorities must therefore remain vigilant. Regular updates to the published analysis will continue to form part of this continuous monitoring.'

FSMA and IOSCO Chair Jean-Paul Servais: 'This initiative demonstrates that good cooperation between authorities, at both national and international level, is essential. We observe that different regulators often face similar problems. This is why the National Bank and the FSMA have been proactively working together for several years to identify risks in the non-banking sector. This cooperation was also much appreciated by the International Monetary Fund (IMF) when it conducted its Financial Sector Assessment Program (FSAP) in Belgium in 2023. We are also taking a leading role internationally. Financial markets have no borders, nor do risks. Under my chairmanship, the cooperation between the International Organization of Securities Commissions (IOSCO) and the Financial Stability Board (FSB) has grown into a true partnership. In this regard, we have published new international recommendations aimed at substantially strengthening liquidity risk management of investment funds.'