Banque Nationale Bank

DE BELGIQUE VAN BELGIË

Eurosysteem

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LE GOUVERNEUR

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Brussels, 16 November 2015

Uniform Letter to Institutions Regarding the Effective Management's Report on Internal Control Assessment

Madam,
Sir,

The National Bank of Belgium (hereinafter referred to as "the Bank") has conducted a horizontal analysis of the effective management's reports regarding the assessment of internal control (cf. Circular NBB_2011_09 of 20 December 2011). The underlying objective of this exercise is to increase the added value of these annual reports, both for the Bank and for the sector. The comparison, at a given point in time, of reports from a representative range of institutions has made it possible to identify a series of general trends. In light of these findings, the Bank invites institutions to take the necessary steps to take the following points of attention into account:

1. The detailed report must be preceded by an executive summary, which will address at least the following points:

   a. the manner in which the report is prepared and the functions associated with its drafting;

   b. a list of the most significant deficiencies, the measures to be taken to remedy them, and the schedule followed for this purpose;

   c. a list of the main adaptations of the report compared to that of the previous year;

   d. where applicable, the reasons for deviating from the standard template presented in the annex to the circular.

2. In order to more easily identify new developments compared to the report of the previous year, it is further recommended to send a version containing modifications in track changes mode and to highlight relevant modifications in the executive summary.

3. Since the drafting of the report requires the collaboration of several functions, it is important to provide for a coordination role tasked with ensuring the consistency of the report.

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your references your correspondent Kurt Van Raemdonck tel.: +32 2 221 53 39 fax: +32 2 221 31 04 kurt.vanraemdonck@nbb.be

our references
TA/2015/11/L106.KVR.DuM

Prudential Policy & Financial Stability
National Bank of Belgium s.a.
14 Boulevard de Berlaimont
1000 Brussels
BELGIUM

company number:
0203.201.340
RPM Brussels www.bnb.be

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LE GOUVERNEUR
Page 2/2 – 2015-11-16

4. The assessment must more clearly establish links between identified risks, internal controls, observed weaknesses, and measures to be taken. In this regard, it is appropriate to make a clearer distinction between important aspects and less important aspects, in order to give greater weight to the report's message.

5. We request credit institutions that fall directly under the supervision of the European Central Bank (ECB) to ensure that reports are, as far as possible, drafted in English, provided this is not already the case. This would facilitate the transmission of information to the ECB.

Regarding branches of credit institutions subject to another Member State, it is also observed that following the revision of the banking law (articles 315 and 316), the report no longer needs to cover compliance with so-called general interest rules.

The aforementioned points of attention will also be included in Circular NBB_2011_09, which will be updated in light of the modification of various legal provisions. The Bank nevertheless expects institutions to take them into account immediately for reporting on the 2015 financial year. This applies in particular to the drafting of an executive summary.

A copy of this letter is sent to the approved auditors of your institution.

Please accept, Madam, Sir, the expression of my distinguished salutations.

Jan Smets
[Handwritten Signature]