Belgian Financial Sector Resilient in 2024, But Risks Loom, Says National Bank
Brussels, The Gulf Observer: Despite a year marked by extreme market volatility and global economic turbulence, Belgium’s financial sector posted a relatively strong performance in 2024, according to the latest Financial Stability Report released Wednesday by the National Bank of Belgium (NBB).
The report credits Belgium’s economy with achieving a “soft landing” following a period of soaring inflation and aggressive monetary tightening in 2022 and 2023, including a series of sharp interest rate hikes. The NBB noted that this outcome was positive, considering the challenging macroeconomic backdrop.
A notable development during the year was the return of €22 billion to Belgian banks, originating from a one-year government bond issued in September 2023. The capital had primarily come from regulated savings accounts and its reintegration into the banking system contributed to sectoral liquidity and stability.
However, the NBB warned against complacency, urging financial institutions to remain cautious in the face of ongoing geopolitical tensions and economic uncertainties in the United States. It highlighted persistent risks that could undermine financial resilience if left unchecked.
One major concern flagged by the central bank is the ongoing weakness in Belgium’s commercial real estate market, which has yet to recover despite an easing in monetary policy. High interest rates and the structural shift towards remote working continue to weigh on the sector’s recovery prospects.
“These risk pockets must be monitored closely,” the NBB stated, stressing the need for banks to remain vigilant about potential credit risks linked to this segment.
In light of continued global uncertainty, the NBB is maintaining its macroprudential policy stance, including the countercyclical capital buffer, which remains at €2.5 billion or 1%. This buffer serves as a safeguard against potential shocks to the financial system.
The central bank also reiterated its call for sound public finances, warning that deteriorating debt sustainability could adversely affect the banking sector. “The health of public finances has a direct impact on financial institutions,” the NBB emphasized.
Overall, while the financial system has demonstrated resilience, the NBB stressed the importance of prudence and preparedness to maintain stability amid ongoing global challenges.
