Home > News > COVID-19 - Impact on Financial Sector - 5 August 2020
Print pageprint Stay Informedprint

NEWS

COVID-19 - Impact on Financial Sector - 5 August 2020

calendar_new
05/08/2020

Please find below a summary of  COVID-19 developments of last week (27/7 until 31/7 included); these alerts are dedicated to following up on the financial  regulators’ responses to the crisis. We have also created a COVID-19 Resource Center to offer legal and business insights as this crisis continues to evolve. We wish you and your loved ones well.

If you have any questions please feel free to contact: 

Tom Van Dyck
+32 475 90 90 91 
t.vandyck@liedekerke.com

Freya Mareels 
+32 475 25 11 50
f.mareels@liedekerke.com

Wim Dedecker
+32 491 36 03 99
w.dedecker@liedekerke.com

 

30/07/2020

 The NBB requests that Belgian credit institutions and (re)insurers do not pay dividends for the time being

 
 

The NBB urges Belgian credit institutions, insurers and re-insurers to suspend their dividend payments until at least 1 January 2021 and encourages them to maintain a cautious attitude towards variable remuneration and profit sharing.
 
Specifically relating to the insurance sector, the NBB states that this sector is affected by the consequences of the COVID-19 pandemic. Although the solvency of the insurance sector remains at an adequate level, there is still considerable uncertainty about the long-term impact of the COVID-19 pandemic on this sector. The insurers’ financial and prudential statements are characterised by a high degree of uncertainty in the assumptions underlying the long-term projections needed to set up the balance sheet. This gives rise to additional complexity and uncertainty in estimating the impact of the COVID-19 pandemic on the insurers’ financial position.
 
The recommendations follow a request by the ECB and the European supervisory authorities to financial institutions to refrain from dividend distributions (and other similar actions).

 

     

29/07/2020

 The health crisis and the various measures it has brought about continue to weigh on the recovery of household consumption in Belgium

 
 

The NBB states that the COVID-19 epidemic has significantly slowed individual consumptions. After the lockdown, however, family consumption does not appear to increase immediately: most consumers report that they are less likely to go to shops and catering establishments, mainly because of the measures in force and because of health fears. This confirms the NBB’s analysis that general measures to support purchasing power were likely to have only a limited impact on household consumption. 

Consumers also appear to have changed their consumption habits during the lockdown, in particular by using e-commerce more than before, and are preparing to adopt these new habits in the coming weeks. 

This is shown by a survey carried out by the NBB from 14 to 21 July in cooperation with the Microsoft Innovation Center, i.e. before the flare-up of the number of infections and before the recent tightening of health measures by the government to limit the spread of the virus.

 

     

28/07/2020

 Communication NBB_2020_029 / Communication on scenario analysis in the context of the COVID-19 crisis

 
 

The NBB states that the restrictive measures taken to combat the COVID-19 pandemic led to an unprecedented social and economic crisis, the effects of which are felt throughout the world and Belgian economies. 

Like other sectors of the economy, the insurance sector is hit hard. Many budget plans for the year 2020 are compromised. The results of insurance companies will come under pressure: there will be effects in the premium volume, in the expense of claims and in investment returns. The solvency position may also be affected by the crisis, both in the short term and in the medium term.

 
     

28/07/2020

 Circular NBB_2020_31 /EBA guidelines on statutory and non-statutory moratoria for commitments to loans applied in the light of the COVID-19 crisis

 
  In this circular the NBB indicates that the guidelines of EBA on legally established and non-legally established moratoria for payment obligations on loans applied in the light of the COVID-19 crisis (consolidated version of 25 June 2020 of the EBA guideline EBA/GL/2020/02 integrating EBA Guidelines EBA/GL/2020/08), are integrated into its supervisory practice. 

The circular contains a brief summary of these guidelines and can be consulted on the EBA website.
 
     

30/07/2020

 EBA sees first impact of COVID-19 materialising in EU banks’ Q1 data

 
 

EBA published its quarterly Risk Dashboard together with the results of the Risk Assessment Questionnaire (RAQ). 

The updated data shows that the impact of COVID-19 was mainly reflected in a contraction of banks’ capital ratios and profitability, the cost of risk increased, whereas non-performing loans (NPL) ratios remained stable, confirming that the impact of the pandemic on asset quality can be delayed. 

The EBA also published a thematic note on leveraged finance, which highlights that the expansion of this market segment in recent years has come along with a significant easing of credit standards.

 
     

30/07/2020

 EIOPA outlines key financial stability risks of the European insurance and pensions sector

 
  EIOPA published its July 2020 Financial Stability Report of the (re)insurance and occupational pensions sectors in the European Economic Area.

During the last months, the COVID-19 outbreak proved the importance of the Solvency II regulatory framework. The market-consistent and risk based approach helped insurers to better align capital to risk, build-up resilience and enhance the risk management practices, while the adjustments included for long-term guarantees allowed to partially mitigate market volatility caused by COVID-19. As of year-end 2019, the insurance sector had a solid and comfortable capital buffer (median SCR ratio of 213%) which helped insurers to withstand the initial severe market shocks experienced with the COVID-19 crisis. 

However, a high level of uncertainty on the magnitude of economic disruption increases downside risks going forward. COVID-19 has further intensified the preexisiting challenges posed by the prolonged low yield environment, a fundamental risk for both insurance and pension sectors.
 
     

27/07/2020

EIOPA Statement on Solvency II supervisory reporting in the context of COVID-19

 
  Following EIOPA’s Recommendations of 20 March 2020 on annual and quarterly reporting and publication deadlines, EIOPA considers that insurance and reinsurance undertakings should now be in condition to comply with the deadlines provided in the Solvency II framework