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The banking sector is heavily regulated and regulations change often. We meet Laurence van Zuylen, Head of the Regulatory and Supervisory department at BIL.

Can you explain the background behind the banking sector’s regulatory framework? The current banking regulatory environment is heavy. Banks must comply with extremely detailed regulations relating to customer protection, anti-money laundering and risk management, for example, to ensure their integrity and solidity.

The majority of regulations in recent years result from the 2008 financial crisis (and the European debt crisis). The European banking union was created in response to this crisis, which imposed a set of common rules on all banks in terms of capital requirements and a common system for deposit protection. The banking union also established a single supervisory mechanism, overseen by the European Central Bank in collaboration with national authorities, along with a single resolution mechanism to prevent and handle failing banks.

To understand the current regulatory environment, you have to go back to a central notion: trust. Banks exist and financial markets operate on the trust that clients and investors place in them. This trust is essential, and for that, the banking sector must be sound and robust. Governments and legislators wanted regulation to play this role. For banks, regulation represents huge investments, but it’s also their ally and an asset in the eyes of their clients. This is also what sets them apart from financial players like GAFA or fintech companies. How has regulation changed over the past few years? The regulatory pressure on banks remains high. Regulation is a nature of the times and changes are determined by events, behaviours, moral values and technology. The banking sector is no exception to this rule. For example: the 2008 crisis produced MiFID II and the banking union; the Paris terrorist attacks resulted in the fifth directive on anti-money laundering and terrorist financing; and the digital transformation brought about a revised directive on payment services.

What impact has the pandemic had on banking regulatory framework? The Covid-19 crisis has slowed down the adoption and entry into force of certain regulations. However, it has highlighted the role of financial supervisory authorities. All BIL Group entities respond to one or more authorities: the European Central Bank, Commission de Surveillance du Secteur Financier, or even foreign supervisory authorities such as FINMA (the Swiss supervisory authority). Since the onset of the crisis, these authorities have been concerned about maintaining a stable financial system, by ensuring banks are ready to absorb the shock, and they’ve done everything in their power to maintain business activity during the pandemic and to prepare for the next step. Again, it shows the power of regulation, and that the bank does not see it as a constraint but as a way to improve its services time and again. It represents real added value for our clients.

“The banking sector’s regulatory framework represents real added value for our clients.”