What has changed?
On 24 November 2020, the Belgian Act of 8 November 2020 introducing provisions on the basic banking service for companies in Book VII of the Code of Economic Law was published in the Belgian State Gazette.
This new act introduces a right to basic banking services for companies by incorporating such right in Book VII of the Belgian Code of Economic Law. The right of having access to a payment account for making the necessary payment transactions is considered by the Belgian legislator as not only a necessity for consumers, but also for companies to allow them to participate in daily economic life.
The new rules will enter into force on 1 May 2021, subject to a few exceptions that require further clarification by royal decree.
What does it mean?
Background regarding Belgium’s right to basic banking services
Belgium has already in place a right to basic banking services for consumers, but not for companies. As such, some companies, like those in the diamond industry and the horeca sector or even entrepreneurs who failed or faced bankruptcy in the past, encounter difficulties in opening a payment account with a credit institution. This new legislation aims to enable such companies, just like consumers, to open a payment account so they can pursue their professional activity.
In addition, the preparatory works of the legislator explain that the use of a payment account will also help the fight against money laundering and the financing of terrorist activities.
Scope of application
The right to basic banking services for companies is limited to those companies established in Belgium and registered (or in the process of registering) with the Crossroads Bank for Enterprises. The following types of companies are covered:
- Each natural person carrying out a professional activity as self-employed
- Each legal entity
- Each organisation without legal personality
Certain entities are excluded, such as certain non-profit entities without legal personality; certain public legal entities that do not offer goods or services on the market; and certain national, regional or local governments.
The concept of “basic banking services”
Basic banking services (banking/payment) consist of the following:
- Services enabling cash to be placed on a payment account as well as all the operations required for operating a payment account
- Services enabling cash withdrawals from a payment account as well as all the operations required for operating a payment account
- Execution of payment transactions, as follows, including transfers of funds on a payment account with the user’s payment service provider or with another payment service provider:
- Execution of direct debits
- Execution of payment transactions through a payment card
- Execution of credit transfers, including standing orders
With regard to the first two services, the right to basic banking services only applies within the European Economic Area. Accordingly, it only includes the possibility to place cash on a payment account or withdraw cash anywhere within the European Economic Area. The other services are not subject to territorial restrictions and apply worldwide.
Basic banking services must be available at the credit institution’s counter or ATMs, during or even outside office hours. Moreover, the credit institution needs to offer the company the possibility to carry out an unlimited amount of electronic transactions through its internet platform.
The company should not be obliged to carry out its payment operations in any particular way. For example, basic banking services should not be offered exclusively online. Moreover, basic banking services are offered in euros or, for the execution of payment transactions and at the company’s request, in US dollars.
Companies can only exercise their right to basic banking services against credit institutions, and thus not against other regulated financial institutions such as payment institutions or e-money institutions.
Grounds to refuse a request for basic banking services
A credit institution can, however, refuse to provide basic banking services on the following grounds:
- For anti-money laundering compliance reasons (for example, if a credit institution is unable to comply with its customer due diligence obligations, it may not enter into a business relationship with that customer or carry out transactions on its behalf)
- If the company already has another payment account that it can use in Belgium or in another member state, unless the company proves that such account does not suffice to carry out its professional activities
- If the company closed its payment accounts for the purpose of making use of the right to basic banking services
A refusal to provide basic banking services must be in writing and must be motivated. It must also expressly state the complaint and out-of-court procedures available to challenge the refusal.
If at least three credit institutions refuse to offer basic banking services, a company can submit a request to the basic banking services chamber within the Federal Public Service Economy to obtain basic banking services. The request must be made in writing by means of a form made available by the refusing credit institution.
After receiving the request, the basic banking services chamber asks for a confidential opinion from the Belgian financial intelligence unit. If the advice is positive or no reply is received within 60 days, the basic banking services chamber designates a basic banking services provider from the list of systemically important institutions, which are essentially credit institutions under direct supervision of the European Central Bank. The economic activities of the company are taken into account when designating such a credit institution. For example, a credit institution that does not include the US dollar in its commercial services will not be forced to offer it.
The designated credit institution cannot provide credit or overdraft facilities in connection with the basic banking services. It is, however, possible that such credit facilities may be granted at a later time, separately from the basic banking services. Basic banking services cannot be made subject to the conclusion of an ancillary service agreement as referred to in Article I.9, 70° of the Code of Economic Law either (i.e., an ancillary service in connection with a credit or payment service).
The designated credit institution can refuse to provide basic banking services under the following circumstances:
- A member of the governance body of the company has been convicted of fraud, abuse of trust, fraudulent bankruptcy or forgery.
- Following its application, the company has opened another payment account that it can use in Belgium or in another member state.
The designated credit institution can terminate the basic banking services under the following circumstances:
- A member of the governance body of the company has been convicted of fraud, abuse of trust, fraudulent bankruptcy or forgery, or the company abused the payment account for illegal purposes,
- No payment transaction under the basic banking service has taken place on the payment account concerned for more than 12 consecutive months,
- The company has provided incorrect information with a view to obtaining the basic banking services or in response to questions asked by the credit institution relating to its anti-money laundering compliance due diligence.
- The company has opened another payment account that it can use in Belgium or in another member state.
- The termination occurs in accordance with the provisions of Belgium’s anti-money laundering legislation.
If the termination is based on bullets one, three or five above, the termination shall take effect immediately. If, on the other hand, the termination is based on bullets two or four, a notice period of at least two months must be respected. The decision to terminate shall be in writing, free of charge, and must be motivated, unless such motivation would not be possible due to anti-money laundering compliance obligations (“tipping-off” prohibition).
In the case of a refusal or termination, the company can object to this decision with the Ombudsman for financial services.
Finally, for obliged entities that are subject to Belgium’s anti-money laundering framework, a basic banking services provider can only be designated by the basic banking services chamber once a royal decree has been adopted that either (i) defines specific additional risk mitigation measures or (ii) ratifies a code of conduct between the sector concerned and the representative professional association for the financial sector (i.e., Febelfin). In other words, the right to basic banking services for obliged entities, such as payment institutions, e-money institutions, diamond traders, alternative financing platforms, etc., will only become fully effective once such future royal decree has been adopted.
Reporting obligations for credit institutions
Credit institutions are obliged to submit to the Federal Public Service Economy and the Belgian financial intelligence unit a yearly report on the number of accounts opened following a request for basic banking services, as well as the amount and reasons for refusals and terminations of such basic banking services.
What is next?
With the introduction of this new legislation, a right to basic banking services now exists in Belgium not only for consumers, but also for companies. With these new provisions, the Belgian legislator is following the footsteps of other jurisdictions, such as France, where companies also have a right to basic banking services.
Some sectors, such as the (Antwerp) diamond industry, will welcome the new rules as these will allow companies to avoid using foreign payment accounts for their daily transactions, and it will also simplify the way they can establish new companies or subsidiaries. When the new rules enter into force (and the required royal decrees have been adopted), these companies will no longer need to open a (blocked) bank account with a foreign EEA credit institution; they could use a Belgian bank account instead. In the past, this was even more problematic as one was required to use a Belgian blocked bank account to establish a Belgian company, which has now been extended to EEA bank accounts since the entry into force of Belgium’s new Companies and Associations Code.
Belgian credit institutions will need to revisit their existing policies regarding (the refusal and termination of) basic banking services, and they will have to extend their services to companies as well. Refusals or terminations will have to be carefully documented and motivated. In addition, they will need to report annually to the authorities as regards how many basic banking service accounts were opened, refused and terminated.
Belgian credit institutions supervised by the European Central Bank are directly impacted, as they may be designated as basic banking services providers for “refused” companies. The exact arrangements as to how such designation will take place are yet to be further executed by royal decree.
If you want to read more, the new legislation and its preparatory works can be found here. If you require further assistance or guidance on the matter, please consult your regular contact at Baker McKenzie.