200 countries and territories are connected to SWIFT

Now SWIFT, the new risks for banks!

According to the International Monetary Fund (IMF) as background documentation for the periodic consultation with Belgium, Financial System Stability Assessment paper on Belgium was prepared by IMF to focus on Belgium Financial system stability assessment.

Stress tests on banks and insurance companies confirm that they can absorb credit, sovereign, and market losses in the event of a severe deterioration in macro financial conditions. The risk of interbank contagion through direct exposures is low. Insurance companies are also generally resilient and the losses incurred by those that belong to banking groups do not threaten the soundness of those groups.

The oversight arrangement for the Belgium-based Society for Worldwide Interbank Financial Telecommunication (SWIFT) has proven effective, but is being challenged by new risks. Key among these are cyber security incidents in SWIFT’s global user network. 

To strengthen the NBB's ability to exercise its role as overseer and protect Belgium's reputation as a key hub for FMIs, the authorities should consider complementing the NBB’s use of moral suasion with regulatory and supervisory powers and should enhance the NBB’s ability to share information with foreign authorities.

De facto Belgium is home to SWIFT, a critical service provider (CSP) for FMIs across the world. Many systemically important FMIs, their participants, and correspondent banks are dependent on SWIFT’s core financial messaging services. At end-September 2017, 239 market infrastructures were using SWIFT. Around 11,000 institutions across 200 countries and territories are connected to SWIFT.

SWIFT messaging services support domestic and international payments and facilitate the settlement of payments and securities transactions, including in central banks’ monetary operations. Belgium, as a financial center, and the NBB as the authority in charge of its oversight, face reputational risk in case of an incident (including a cyber security incident) impacting SWIFT’s core services.

NBB has recognized SWIFT as a critical infrastructure under the 2011 Law on the Protection and Security of Critical Infrastructures, which subjects SWIFT to additional requirements for security planning.

IMF report says, Belgium should continue efforts to enhance the effectiveness of its anti-money laundering/ countering the financing of terrorism (AML/CFT) framework. Action Task Force (FATF) evaluation found a well-established regime, notwithstanding some deficiencies. Since then, steps have been taken to strengthen the framework, notably with respect to combating the financing of terrorism and AML/CFT supervision.

However, efforts need to continue to fully implement the FATF’s recommended actions.