Belgium achieves high overall compliance with international standards and codes, with a score of 60.83 out of 100 in our Standards Compliance Index. As a Euro-member country, Belgium's compliance in the area of macroeconomic fundamentals is high. Observance in the financial supervision area is equally high, for the most part. The exception is insurance supervision, where measures are being taken to enhance compliance. In the area of institutional and market infrastructure, observance of international financial reporting standards lags behind but as a member of the European Union, Belgium had to adopt international standards on auditing before June 29, 2008. In the area of Payment Systems, Belgium was part of the second group of countries that on February 18, 2008 joined TARGET2, which provides harmonized payment services under a single shared platform across its member countries.

Macroeconomic Policy and Data Transparency

Belgium subscribed to the International Monetary Fund's (IMF) Special Data Dissemination Standard (SDDS) on June 6, 1996, and met SDDS requirements on January 26, 2001. Based on information provided on the SDDS website, Belgium meets SDDS requirements for periodicity, coverage, and timeliness of data. However, the IMF reported in 2007 that, during that year, Belgium experienced occasional short delays in the timeliness of data for production index and analytical accounts of the banking sector. The report also indicated that Belgium met the SDDS' advance release calendar requirements in 2007. With regard to the quality of data, the IMF report concluded that Belgium, in 2007, provided information on the methodology, sources, and reconciliation of certain data categories. However, a closer examination of Belgium's data on the SDDS website discloses that there are several data points in which information regarding the quality dimension of the SDDS is lacking. Moreover, in its 2007 report, the IMF acknowledges that Belgium has yet to receive a Mission to produce a data module for the Reports on Observance of Standards and Codes in which the IMF might assess in detail the quality of Belgium's statistical system. More »

Belgium adopted the Euro at its launch in January 1999. With this act, Belgian monetary policy ceased to be governed by the National Bank of Belgium. Rather, the Governing Council of the European Central Bank (ECB) determines Finnish monetary policy, and the Eurosystem (consisting of the ECB and the central banks of the member states that have adopted the euro) is responsible for policy implementation. According to the IMF, the Eurosystem and the ECB maintain high transparency standards and a commitment to openness. The ECB observes the IMF's codes and standards for monetary policy transparency and pursues an active policy of communication with the public. More »

According to a 2008 IMF Report on the Observance of Standards and Codes (ROSC), Belgium meets and in some cases exceeds the requirements of the IMF's fiscal policy transparency code. The ROSC observes that overall fiscal policy in Belgium is rooted in a sound institutional and legal framework, roles and responsibilities in the budget process are clear (i.e. there is a well-defined separation between the executive and legislature), and fiscal information is made available to the public through regular publications and extensive use of the internet. In addition, the ROSC notes that the budget formulation is underpinned by thoroughly formulated and clear medium-term macroeconomic forecasts and fiscal policy goals. Nevertheless, the ROSC found several areas where Belgium could improve its fiscal transparency regime. For instance, the Belgian budget process and legal framework are complex and, while open to the public, not transparent for non-experts. In May 2003, the Belgian parliament passed a new budget management bill to simplify the budget process and make it more transparent. The new legislation calls for the creation of internal audit units in departments and agencies. It is expected that this law will be fully implemented during 2008-2010. More »

Institutional and market infrastructure

PricewaterhouseCoopers' European Restructuring and Insolvency Guide 2005/2006 lists three procedures available to insolvent companies in Belgium: judicial composition, bankruptcy, and judicial or voluntary winding-up. The purpose of winding-up and bankruptcy is to liquidate bankrupt enterprises that have no chance for recovery, whereas a judicial composition helps recover assets of companies that still have potential and a chance to be economically viable. The country's insolvency framework is governed by two acts: the Judicial Composition Law of July 17, 1997 and the Bankruptcy Law of October 8, 1997. Belgium has no specialized bankruptcy courts, and bankruptcy and judicial composition cases are supervised by the commercial court. In 2003, the European Commission's Expert Group reported that of the 41 Principles and Guidelines for Effective Insolvency and Creditor Rights Systems set forth by the World Bank, Belgium has fully adopted 8, almost fully adopted 20, partially adopted 9, and not adopted 4. More »

In line with the European Commission's (EC) Regulation No. 1606 of 2002, listed companies in Belgium are required to use International Financial Reporting Standards (IFRSs) as endorsed by the European Union for preparation of consolidated accounts. As far as the options available for member states to permit or require international standards in other types of accounts for different types of companies are concerned, the 2008 EC report on the implementation of Regulation No. 1606 of 2002 asserts that Belgium requires IFRSs in the annual accounts of listed real estate investment companies and will consider permitting IFRSs in the annual accounts for other companies (listed and unlisted), once the tax and legal aspects of this decision are evaluated. Further, the use of IFRSs is permitted in the consolidated accounts of all other companies and is required in the consolidated accounts of credit institutions and investment firms. Companies that are not required to use IFRSs or choose not to use them follow the Belgian Generally Accepted Accounting Principles, which, according to a number of publications on the subject, differ from their international equivalents. However, as noted in the 2007 European Committee of Central Balance Sheet Data Offices, in December 2003 the Accounting Standards Committee (ASC) published the "Policy plan concerning the application of the IFRS Regulation and the convergence of the Belgian accounting law towards IFRS" with the objective of "adjusting" the Belgian accounting framework to IFRSs. As of June 2008, there is insufficient information publicly available as to the progress made in eliminating differences between the Belgian and international requirements. More »

According to a 2002 study prepared by the international law firm Weil, Gotshal & Manges for the European Commission, the Belgian financial market is characterized by the use of bearer shares, the dominance of small and medium-sized companies, and strong ownership concentration. The corporate governance debate in Belgium centers around the separation between ownership and control, as well as the opposition between the controlling and the minority shareholders, as stated in a 2006 report by Bogaert and Peeters. On December 9, 2004, the Corporate Governance Committee (Committee Lippens) published the Belgian Corporate Governance Code, which is based on the "comply or explain" principle, replacing the 1998 Recommendations on Corporate Governance. Bogaert and Peeters note that the Code, which entered into force on January 1, 2005, has brought significant improvements to the Belgian corporate governance regime. While the Code applies to all Belgian listed companies, it also functions as a reference framework for all other companies. According to the International Monetary Fund's 2006 Financial System Stability Assessment, the Banking, Finance and Insurance Commission intends to review the current system of corporate governance applicable to financial institutions, with the aim of developing a modern framework that will empower financial institutions to put in place their own corporate governance structure. Nevertheless, there is insufficient information publicly available addressing Belgium's compliance with the Organization for Economic Co-operation and Development (OECD) Principles of Corporate Governance. More »

On May 17, 2006, Directive 2006/43/EC of the European Parliament and Council came into force, requiring all statutory audits to be carried out on the basis of International Standards on Auditing (ISAs) as adopted by the European Commission. EU member states shall adopt and publish the provisions necessary to comply with this Directive before June 29, 2008. Member States may impose additional requirements relating to the statutory audits of annual and consolidated accounts for periods expiring on June 29, 2010. Being a member of the European Union, Belgium has to transpose the Directive into national legislation and will therefore adopt ISAs in the required timeframe. According to the self-assessment prepared by the Institute of Public Accountants and Tax Consultants in Belgium (IEC), the Company Code of 2001 requires auditors to use the Belgian Generally Accepted Auditing Standards (GAAS) for statutory audits. Listed companies can be audited either in accordance with the Belgian GAAS or following ISAs. Per the 2007 IEC self-assessment, the IEC together with the Institute of Registered Auditors established a commission with the aim to converge the national auditing standards with ISAs. More »

The Financial Action Task Force (FATF) conducted a mutual evaluation of Belgium's Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) regime against the FATF's 40+9 recommendations and special recommendations. The FATF published its findings in a 2005 report, in which it concludes that Belgium is compliant with 21 recommendations and special recommendations; largely compliant with 20; partially compliant with 6; non-compliant with 1; and one recommendation does not apply to Belgium. The report notes that Belgium's legal and oversight framework for AML/CFT is broadly consistent with FATF standards, due partly to the implementation, in January 2004, of the Second European Union (EU) Anti-Money Laundering Directive, which broadened the scope of money laundering predicate offenses beyond drug-trafficking to include the financing of terrorist acts or organizations. Nevertheless, there are some minor areas where Belgium's AML/CFT regime could be enhanced. Most importantly, the FATF report notes that Belgium's freezing and confiscation regime is generally insufficient to meet the FATF Recommendations, since the EU regulation on freezing terrorist assets (S/RES/1373 of 2001), to which Belgium is a signatory, does not apply to European terrorists. In addition, Belgium is only "partially complaint" with the FATF's recommendations relating to Designated Non-Financial Business and Professions (DNFBPs), due partially to limited staff resources, which prevents authorities from adequately monitoring AML/CFT legislation adoption by DNFBPs. According to a 2008 report by the U.S. Department of State, Belgium was expected to implement the Third EU Money Laundering Directive in December 2007. This Directive contains the requirement that all EU member states implement the FATF's recommendations. However, a June 2008 press release by the EU, reports that the European Commission has decided to pursue infringement procedures against 15 member states, including Belgium, for failure to implement the Third Anti-Money Laundering Directive in national law. More »

The domestic inter-bank payment systems in Belgium are the Electronic Large-value Inter-bank Payment System (ELLIPS), the Centre for Exchange and Clearing, and the Clearing House of Belgium. Of the three, only the ELLIPS has been explicitly classified as a systemically important payment system (SIPS) by the National Bank of Belgium in its 2007 Financial Stability Review. In its 2004 assessment of the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET) system components, the European Central Bank concluded that the ELLIPS fully observed eight of the ten Core Principles for Systemically Important Payment System (CPSIPS) as defined by the Committee on Payment and Settlement Systems. It largely observed Principle VII and VIII. TARGET was replaced by TARGET2 in November 2007. The migration of TARGET member countries has taken place in groups of four. Belgium was part of the second group of countries that joined TARGET2 on February 18, 2008. With the adoption of TARGET2 by Belgium, the ELLIPS ceased to exist. With TARGET, the large value interbank payment systems of member countries were interlinked, but TARGET2 provides harmonized payment services under a single shared platform across its member countries. However, there is little information assessing TARGET2's compliance with the CPSIPS, except for a statement in the ECB's 2002 report on TARGET2, in which it indicates that the system is expected to fully comply with the CPSIPS. Despite the lack of information on TARGET2, it is generally believed that TARGET2 is an improvement over its predecessor and its component systems. Therefore, the level of compliance assigned to Belgium by the 2004 ECB assessment is maintained until TARGET2 is fully implemented in all its member countries and assessed against the CPSIPS. More »

Financial Regulation and Supervision

Belgium has one of the largest number of banks per capita in the world, and its banking system is considered sound, profitable, and relatively efficient, according to the IMF's 2006 Financial System Stability Assessment (FSSA). The IMF report, which assessed Belgium's observance of the Basel Core Principles (BCPs) for Effective Banking Supervision, states that Belgium exhibits a high overall level of compliance with the essential and additional criteria of the BCPs. Moreover, the legal framework for banking supervision in Belgium is well developed, and practical implementation is strong. The staff of the Banking, Finance, and Insurance Commission (CBFA) also enjoys a strong reputation for professional skill and integrity. The CBFA was established in January 2004 as the integrated supervisory authority for the Belgian financial sector. However, there is a need for effective consolidated supervision, in light of increased cross-border activities and the development of complex banking groups conducting both banking and insurance activities, also known as bancassurance groups. In the context of integrated supervision, the IMF report further recommends strengthening the non-bank supervision functions of the CBFA and upgrading its systems and staff to keep current with evolving best practices, such as Basel II, without diverting resources from the existing, sound, risk-based system of bank supervision. More »

The Belgian market is fully integrated into the European market, as noted in the International Monetary Fund's 2006 FSSA. At the time of the Assessment, Euronext Brussels was the only regulated stock exchange in Belgium. Euronext merged with the NYSE Group on April 4, 2007, to form the first transatlantic stock exchange group. According to the FSSA, which assessed Belgium's compliance with the International Organization of Securities Commission's Objectives and Principles of Securities Regulation, supervision in the securities area is of high standards. The general preconditions for effective securities regulation appear to be in place. Moreover, Euroclear is a safe, sound, efficient, and reliable system for the clearance and settlement of securities transactions. Weaknesses were identified in a few areas, including transparency of the securities enforcement procedure and the use of bearer shares. Securities regulation in Belgium is mainly based on the 2002 Law on the Supervision of the Financial Sector and on Financial Services. Since January 1, 2004, the Banking, Finance, and Insurance Commission is the single supervisory authority for the Belgian financial sector, created as a result of the integration of the Insurance Supervision Office into the Banking and Finance Commission, pursuant to the 2002 Law. The EU Directive No. 2004/39/EC on Markets in Financial Instruments has been implemented in Belgium as of July 1, 2007. More »

The major banks and insurance companies in Belgium are part of the cross-border bancassurance groups that dominate the Belgian financial system, according to the IMF's 2006 FSSA. However, the Belgian insurance sector remains relatively small in comparison to the OECD and EU-15 averages in terms of total premiums as a percentage of GDP. Belgium has adopted a system of consolidated supervision under the CBFA, which acts as the integrated supervisory authority for the Belgian financial sector pursuant to the 2002 Law on the Supervision of the Financial Sector and on Financial Services. The CBFA is a member of the International Association of Insurance Supervisors (IAIS). According to the FSSA, in which Belgian insurance supervisory practices were benchmarked against Insurance Core Principles (ICPs) and Methodology revised by the IAIS in October 2003, Belgium had a relatively low level of compliance with the ICPs, despite its well developed insurance market. Weaknesses were identified with regard to prudential requirements, on-site inspections, suitability of persons, consumer protection, disclosure requirements, and fraud. The FSSA emphasized the need to upgrade insurance supervision, particularly with regard to solvency, and to establish an effective mechanism for consolidated supervision of the bancassurance groups in light of their growing number. At the time of the IMF's 2006 assessment, Belgian authorities were actively pursuing several supervisory initiatives to improve compliance levels. According to the IMF's 2008 Article IV Consultation report, commendable progress had been made in enhancing the effectiveness of prudential supervision of the insurance sector. The overall supervisory framework is also being continuously upgraded, in line with the 2005 IMF recommendations. More »

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Credit Ratings

Moody's Aa1/Positive

Fitch AA+/Stable

Standard & Poor's AA+/Stable

Macroeconomic Data

2007 GDP (Current Prices): 453.636 billion USD (IMF)

2007 GDP (Per Capita): 42,557 USD (IMF)

2008 GDP (Growth Forecast): 1.4% (IMF)

2008 Inflation (CPI): 3.1% (IMF)

2007 Unemployment: 7.6% (CIA)

2006 Foreign Direct Investment

FDI (Inward): 71.997 billion USD (UNCTAD)

FDI (Outward): 63.005 billion USD (UNCTAD)

2006 Official Development Assistance

ODA (Received): N/A million USD (OECD)

ODA (Disbursed): 1978 million USD (OECD)