State of the Belgian Banks 2025

In line with the broader European sector, Belgian banks are preparing for a period of tightening margins as interest rates decline and assets reprice at lower yields. The era of rapid net interest margin (NIM) expansion is expected to end, with profitability normalizing in 2025. Sustaining or improving net interest income will depend increasingly on banks’ ability to grow business volumes in a competitive environment. Moderate credit growth is anticipated as financing conditions ease, but banks will need to remain vigilant about vulnerabilities in real estate lending and the potential impact of geopolitical and economic policy shifts.

A central forward-looking theme is the diversification of revenue streams. As NIMs compress and Basel IV introduces stricter risk-weighted asset requirements – especially affecting non-retail and mortgage portfolios – banks are prioritizing fee-based income from wealth management, advisory, insurance, and payments. This shift is already visible in the 10.5% year-on-year growth in net fee and commission income. Strong capital positions allow for continued dividend distributions and flexibility for inorganic growth, as seen in recent mergers and acquisitions. However, cross-border deals bring challenges in integration, culture, and compliance, requiring strategic agility to capture new opportunities in a maturing market.

Cost control remains a strategic imperative amid upward pressures from legacy IT, regulatory demands, and wage inflation. Banks are accelerating digital transformation to drive operational efficiency, with notable examples including ING Belgium’s below-inflation expense growth and Argenta’s IT-driven cost reductions. The ability to balance cost containment with ongoing investment in customer-centric innovation will be critical for maintaining profitable growth.

Artificial intelligence is rapidly becoming a cornerstone of innovation in Belgian banking. Major banks are deploying AI for digital assistants, automated lending, and productivity tools, while also investing in workforce training and governance frameworks to ensure responsible adoption. Banks are proactively addressing AI-related risks – such as deepfakes and identity theft – by establishing risk frameworks and preparing for compliance with the phased implementation of the EU AI Act. The expectation is that AI will fundamentally reshape workforce skills, internal structures, and resource allocation, with banks positioning themselves to harness its transformative potential.

The EU’s Digital Operational Resilience Act (DORA), effective in 2025, standardizes digital risk management for financial firms, requiring strong ICT controls and recovery from cyber threats. As IT risks escalate – highlighted by the 2024 CrowdStrike incident – Belgian banks are investing in cybersecurity, business continuity, and enhanced oversight of third-party providers, while supervisors are intensifying their focus on DORA compliance, making digital resilience a Board-level priority.

Regulatory compliance remains a persistent challenge, given the introduction of new regulation like Financial Data Access (FIDA) and Payment Services Regulation (PSD3/PSR), alongside the ongoing rollout of frameworks such as Basel IV/CRR3, DORA, Risk Data Aggregation and Reporting (RDARR) and the latest anti-money laundering regulations (AMLR). The ECB’s supervisory priorities for 2025–2027 are focused on enhancing banks’ resilience to macro-financial threats and geopolitical shocks, ensuring prompt remediation of material shortcomings, and supporting banks as they navigate digital transformation.

In 2024, the ECB intensified its supervisory efforts, conducting 165 on-site inspections (OSIs) and 78 internal model investigations (IMIs). Key areas of scrutiny included credit risk (with attention to SME lending, leveraged finance, and commercial real estate), internal governance and risk management (highlighting ongoing weaknesses in IT architecture and data quality with respect to BCBS 239), and C&E risks (shifting from guidance to enforcement). Digitalisation and cyber resilience were also prioritized, with new assessment criteria, expanded cyber inspections, and a dedicated cyber stress test.

As the ECB moves forward, banks can expect continued and heightened scrutiny, especially in areas where supervisory expectations remain unmet, making proactive planning and preparation essential.

Sustainability is moving to the core of banking strategy, driven by the publication of the first CSRD-compliant sustainability reports and a sector-wide focus on climate risk management. Banks are embedding ESG considerations into governance, operations, and product offerings, with climate change seen as a universal material issue. However, the transition to net zero presents both challenges and opportunities, notably in developing forward-looking transition plans for financed emissions, which are expected to become a central focus of future strategy.

At the same time, comparability and data quality in sustainability reporting remain areas requiring further improvement, particularly due to varying technical interpretations and the absence of sector-specific guidance. While the CSRD marks significant progress in standardizing reported information and driving harmonization, additional regulatory and methodological measures will be needed to achieve truly consistent and comparable sustainability performance across banks, as well as to support innovation and resilience in the sector’s transition to a low-carbon economy.

Looking forward, Belgian banks’ strategic outlook is defined by the need to adapt to margin compression, accelerate digital and AI-driven transformation, diversify income, strengthen operational resilience, and embed sustainability. Success will hinge on the ability to manage costs, innovate responsibly, and navigate an evolving regulatory and geopolitical landscape – ensuring resilience and competitiveness in 2025 and beyond.