De-risking and the Basic Banking Service for Businesses in Belgium

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A growing number of businesses are seeing their bank accounts closed and struggling to open new ones. An Antwerp diamond dealer, a cleaning company, a hospitality business, an arms manufacturer, a company holding a stake in a hospital in the DRC, a crypto broker, a real-estate company bought by a Russian citizen: superficially they have nothing in common, except that each received a terse, standardised letter from its bank ending the relationship, closing the accounts and inviting them to provide details of another bank. They are all affected by de-risking.

De-risking: reducing bank risk by closing accounts

De-risking (or de-banking) is a trend of recent years in private banking law. We adopt the FATF definition: the practice of financial institutions restricting or terminating business relationships with clients or categories of clients to avoid, rather than manage, risk in line with the risk-based approach. In 2020, the financial ombudsman (Ombudsfin) recorded 107 admissible complaints about unilateral termination of a banking relationship, up from 74 in 2019 and 50 in 2018.

The paradox created by the Belgian State

Belgium and the EU chose to place on private actors (banks) certain state prerogatives: detecting financial-criminal and tax offences and monitoring their clients’ transactions. By delegating these ever-heavier AML obligations while holding over banks the economic and reputational sanctions incurred for any failing, the authorities created a vicious circle. The State requires every business, as a condition of trading, to hold an account with a private credit institution, while simultaneously creating the conditions for a legitimate wariness among those institutions that can result in the total exclusion of some businesses from the banking system, pushing them towards opaque, hard-to-monitor alternative circuits, precisely what AML rules aim to prevent.

De-risking under AML legislation

Breach of the due-diligence duty carries very heavy administrative sanctions, up to 10% of the previous year’s turnover, or criminal ones, plus reputational damage. These push institutions to build costly internal systems that still guarantee no complete detection of suspicious operations. Ending a relationship then appears as a highly effective way to reduce risk. According to the CTIF-CFI, the most targeted sectors include casinos, football clubs, the diamond trade, second-hand vehicles, hospitality and firearms. In practice, sector is not the only criterion: a directorship held by certain nationalities, or a transfer referencing a sanctioned country, can trigger closure. Mass “blanket de-risking” is prohibited and has been criticised by the National Bank; the practice also affects other Member States, as the EBA opinion of 5 January 2022 shows.

The legal basis for de-risking

Banks play an essential role in the economy but do not perform a public service. They are private companies, free to choose their counterparties and to end an indefinite-term relationship. That right is bilateral and inherent in any indefinite-term contract, so it falls outside the unfair-terms regime. The account contract is strongly intuitu personae. Beyond contractual freedom, Article VII.25 of the Code of Economic Law legitimises unilateral termination of the framework contract on at least two months’ notice, and Article 35 of the AML Act requires banks that cannot meet their due-diligence duty to refrain from entering into, or to terminate, the relationship.

Two imperfect limits

De-risking thus resembles an almost absolute discretionary right, limited only by anti-discrimination law and the prohibition of abuse of rights.

Anti-discrimination law

No legal act may rest on discriminatory criteria under the Act of 10 May 2007 (age, sexual orientation, civil status, wealth, religious or political conviction, language, health, disability, and so on). But the Act places the burden of proving discrimination on the client, which is difficult where the termination carries no reasons and the bank had initially agreed to the relationship.

Abuse of rights

The right to terminate is not absolute; its exercise may be caught by the prohibition of abuse of rights and the duty of good-faith performance. Judicial review remains marginal, but the judge assesses whether the bank manifestly exceeded the normal exercise of the right by a prudent and diligent person, considering all the circumstances, including whether the notice period genuinely allowed the client to find another bank, and the proportionality between the bank’s interest in reducing risk and the client’s interest in holding an account. Crucially, abuse of rights cannot revive a terminated account contract: a substantive challenge cannot force the parties back into a relationship, since termination takes effect definitively and irrevocably; the only remedy on the merits is damages.

The summary-proceedings judge, however, may provisionally suspend the effects of a termination. Where that is the client’s only route to effective relief, and by analogy with exclusive-distribution and terminated-credit cases, the judge may order the provisional continuation of the account relationship. Recently, the Dutch-speaking Brussels enterprise court, sitting as in summary proceedings, ordered a payment service provider to maintain a client’s account and execute its payment operations, on pain of a penalty, until the basic-banking-service law took effect.

The basic banking service for businesses

De-risking created the need for a basic banking service. The metaphor is Epimetheus, “he who thinks too late”: by imposing heavy obligations on banks without a public bank guaranteeing a universal right to an account, the legislature caused the banking exclusion of some businesses. A basic banking service for consumers has existed since 2003 (Belgium preceding the EU Directive of 2014): a right to open, operate and close an account, excluding credit and overdrafts.

For businesses, the Act of 8 November 2020 took effect on 1 May 2021. A business must apply not to a bank but to the “Basic Banking Service Chamber” within the FPS Economy, showing that it is established in Belgium, registered with the Crossroads Bank for Enterprises, and was refused an account, with reasons, by at least three credit institutions. The Chamber then seeks a confidential CTIF-CFI opinion and, if favourable or absent within 60 days, designates a systemically important Belgian institution to provide the service. The designated provider remains bound by AML obligations and may refuse only on limited grounds (for example, a director convicted of fraud, breach of trust, fraudulent bankruptcy or forgery, or the opening of another usable account).

A weak and unworkable law

The law appears drafted in haste. It may contradict the AML Act: under the latter, information on the client and the purpose of the relationship must reach the bank at the latest when the account contract is concluded, failing which the relationship cannot be entered into; yet the basic-banking-service law could force an institution to provide the service without that information and against its own risk policy. Above all, the royal decree meant to set the rules of application was rejected by the Council of State on 6 September 2021 on data-protection grounds and long remained unpublished, leaving letters to the Chamber unanswered.

Epilogue: the liability of the Belgian State

The AML requirements, backed by heavy sanctions, sharpened contradictory interests: banks must both manage risk and remain profitable. Responsible for the situation and unable to strike the balance, the State tried to restore it through the basic banking service without actually delivering it. What had to happen, happened: on 6 December 2021, the Dutch-speaking Brussels enterprise court, in a de-risking case involving a company renting properties to sex workers followed by an inability to open accounts, dismissed the claims against the bank but found the Belgian State negligent in its ability to help businesses open an account and safeguard freedom of trade, ordering it to pay symbolic damages of EUR 2,500. Further actions are likely as long as the law remains unworkable.

This article is a translation. Only the French version is authoritative. It is provided for information purposes and does not constitute legal advice.