FSMA may soon impose disciplinary sanctions on bankers for unprofessional or unfair conduct

The Act of 20 December 2023 containing various financial provisions (the “Programme Act”, published in the Belgian Official Gazette on 15 January 2024) contains important new provisions for directors and certain employees in the banking sector.

Firstly, (i) individual rules of conduct will be drawn up for banking service providers, (ii) the FSMA will be empowered to monitor compliance with these rules, and (iii) to impose disciplinary sanctions in the event of a breach. Any person who believes that the rules of conduct have not been complied with will be able to lodge a complaint with the FSMA.

In addition, the fit & proper” criteria have been tightened and the National Bank of Belgium (NBB) can impose a professional ban on those who no longer meet the suitability criteria.

Banking oath and disciplinary regime for banking service providers

More than a decade after the financial crisis, the legislator decided to introduce a banking oath and a disciplinary regime for the banking sector (Act of 22 April 2019; see our earlier contribution). However, these regulations never came into force, due to the lack of implementing decrees. This situation is about to change. The legislator has changed its approach. The Banking Sector Disciplinary Committee, which was to develop a disciplinary system to monitor compliance with the ethical standards in force, is disappearing again before it was even created.

The banking oath is now contained in the Banking Act itself. All responsible persons in a credit institution, all banking and investment services agents and all other persons directly involved in the exercise of banking activities or services in Belgium must take a banking oath in which they undertake, in all circumstances in the exercise of their professional activities, to (i) act with honesty and integrity, (ii) act in a competent and professional manner, and (iii) take into account the interests of clients and treat them fairly.

A Royal Decree will further clarify these rules, based on a proposal or advice from the FSMA and after consultation with the NBB and the professional associations of banks and banking agents.

The FSMA will be responsible for monitoring compliance with these rules. Any person who believes that a banking service provider has breached the rules of conduct may lodge a complaint with the FSMA Auditor. An FSMA regulation will determine the procedures for lodging a complaint and the conditions to be met for it to be admissible.

The Auditor examines whether there are serious indications that the individual rules of conduct have been breached. The Auditor may do so following a complaint or on the basis of FSMA’s own findings, e.g. following an inspection. The banking service provider concerned is given the opportunity to comment on the Auditor’s preliminary findings. On the basis of its final report, FSMA’s Management Board may then impose a disciplinary sanction.

This sanction may consist of a warning, a reprimand or even a professional ban of up to three years. The first two sanctions may be accompanied by an obligation to follow certain training courses. Sanctions are published anonymously on the FSMA website. An appeal may be lodged with the Council of State. Failure to comply with sanctions (e.g. the obligation to follow certain training courses) may result in administrative penalties.

For the time being, it is not the intention for the complainant to be informed of the outcome of the disciplinary investigation into his or her complaint. The rationale for this is probably to prevent dissatisfied customers of a bank from lodging a disciplinary complaint with the primary aim of using the outcome of the audit investigation to support a claim for damages.

If the disciplinary file concerns a person subject to the “fit & proper” rules for credit institutions, the NBB or the foreign regulator will be informed so that it can take appropriate measures if necessary.

The new regulations will not come into force until the necessary Royal Decree has been adopted. The FSMA has already posted a number of questions and answers (FAQ) on its website to help explain the new regulations. The FSMA states that the new rules are expected to come into force on 15 January 2025 for “fit & proper persons and responsible managers in credit institutions, and on 15 July 2026 for other providers of banking services. The disciplinary rules would apply as from that date, even if the banking service provider concerned has not yet been sworn in. It is expected that several thousand bank employees will have to take the oath.

New “fit & proper assessment criteria (individual qualities and collective skills of the board and the management committee)

The Programme Act also clarifies two aspects inherent in the good governance of credit institutions, namely (i) the individual qualities that “fit & properpersons must hold, and (ii) the collective competence of the board and the management committee:

  • The members of the board of the credit institution, the persons entrusted with the actual management and the persons responsible for the independent supervisory functions must act with honesty, integrity and independence of mind. In the case of the members of the board, this must enable them to evaluate and effectively challenge, where necessary, the decisions of the actual management and to ensure the effective supervision and monitoring of the management decisions taken.
  • The composition of the board and the management committee must be such that, taken as a whole, they have the knowledge, skills and experience necessary to understand all of the institution’s activities, including the principal risks to which it is exposed.

This dual legal requirement must be tested as part of the “fit & properassessment. Thus, the approval of a person who satisfies the “fit & properrequirement on an individual basis may still be refused if his or her profile is not such as to satisfy the collective competence requirement.

In addition, when approving proposed appointments, the supervisory authority (NBB or ECB) must also take into account the extent to which the policy and objectives set by the nomination committee are met, in particular with regard to gender representation.

The same changes will be made to the acts relating to the status and control of stockbroking firms (Act of 20 July 2022) and payment institutions and electronic money institutions (Act of 11 March 2018).

A professional ban when “fit & proper” requirements are no longer met

The NBB can now impose a professional ban of up to five years on persons performing a “fit & proper function within a credit institution if they no longer meet the requirement.

A professional ban may be imposed even after the “fit & properduties have ceased if the supervisor becomes aware of facts that occurred during the performance of those duties.

The professional ban is not limited to functions performed within credit institutions but may be extended by the supervisory authority to functions in other institutions subject to the prudential supervision of the NBB. The supervisory authority must specify in its decision the nature of the prohibited functions.

The same change applies to financial holding companies and mixed financial holding companies.