luc coene : the belgian banking sector in 2020 speech by mr luc coene, governor of the national bank of belgium, at the colloquium “ the belgian banking sector in 2020 ” in celebration of the 75th anniversary of the belgian financial forum publications “ revue bancaire et financiere / bank - en financiewezen ” and “ droit bancaire et financier / bank - en financieel recht ”, brussels, 22 november 2011. * * * the many lessons learned from the crisis that began in 2007 – 2008 have given rise to an ambitious, internationally coordinated, and broad - based set of regulatory reforms. the new regulatory framework not only strengthens requirements and supervision at the microprudential level, but it also incorporates new macroprudential requirements. changes to the regulatory architecture have also led to the creation of new regulatory authorities, at both the european and belgian levels. all of these developments will have significant impacts on the belgian banking sector over the next decade. 1. microprudential supervision – basel iii key elements, which are designed to increase banks ’ resiliency to shocks, include : an increase in minimum regulatory capital requirements : the range of risks for which regulatory capital must be held has also expanded. higher quality of capital : an increase in the amount of capital that must be held in the form of common equity, which offers the greatest capacity for loss absorption. a leverage ratio, which is a non - risk - weighted capital requirement that should serve as a backstop to protect against situations where risk - weighted capital requirements are too low ( through underestimation of risks or regulatory arbitrage ) liquidity ratios : the liquidity coverage ratio will ensure that banks can withstand a liquidity shock of 30 days in duration ; the net stable funding ratio will ensure that banks have a sufficient amount of longer - term stable funding. 2. macroprudential supervision one of the striking outcomes of the crisis has been a change in the focus of prudential regulation, from a narrow concern with the resiliency of individual institutions to a broader preoccupation with the entire financial system. this concern has translated into the inclusion in the basel iii of new macroprudential capital requirements. it has also led to the establishment of a macroprudential authority in the new european regulatory framework. new macroprudential capital requirements : countercyclical capital buffers ( ccbs ) have been introduced into

integration and stability are highly correlated and we believe that this applies not only to monetary policy but also to for instance foreign policy. our trust in european integration is one of the reasons why we at the national bank of belgium are very happy that we got the opportunity to organise the colloquium of today in close co - operation with the royal institute for international relations. a second reason is that we feel like naturally related to the european construction. belgium is indeed one of the six founding fathers of the european union and brussels hosts the main headquarters of the european institutions. at several occasions the national bank of belgium provided the link between the european central banks and the european institutions, for instance on the 31st of december 1998, when the ecofin - ministers met in the consilium building in order to fix the irrevocable conversion rates of the euro. it can't be surprising that we are - maybe more than our colleagues are - keen on the institutional aspects of the european integration. today's colloquium is set against the background of the european convention and the imminent enlargement of the union. the topic we would like to discuss today is the controversial idea of flexibility. is it right that we need more flexibility than provided for by the nice treaty, if we want the larger and more heterogeneous union to function effectively? in the very near future we will indeed be confronted with two challenges when it comes to european integration. one is that the eu is going to expand to an important extent. next year the number of citizens in the eu will increase by 20 %. second challenge is that part of the member states want to deepen the integration, but probably only part of them! i am surely not against the establishment of a larger free trade zone in europe, in particular as a central bank governor. but, as a citizen, my ambition for europe is higher. what instruments do we need to be able to reconcile expansion and deepening? can i recall to you that the former belgian prime - minister leo tindemans argued already in 1975 - more than a quarter of a century ago - in his " report on the european union " in favour of flexibility as a means of deepening the integration process, particularly for monetary policy. it seems that there is nothing new under the sun. and indeed, models of flexible co - operation have already been used in european integration in the past. we can think of the schengen accords agreed in 1985 but originally kept outside