Uniform Letter to All Belgian Credit Institutions – Exemption Policy Regarding Article 36bis of the Royal Decree of 23 September 1992

THE GOVERNOR your references your correspondent Prudential Policy and Financial Stability Nathalie Parfait National Bank of Belgium n.v. company number:
tel.: + 32 2 221 53 64 Boulevard de Berlaimont 14 0203.201.340 our references fax: + 32 2 221 31 04 1000 Brussels RPM Brussels TA/2015/12/L132.PaN.HB nathalie.parfait@nbb.be BELGIUM www.bnb.be Brussels, 22 December 2015 Uniform Letter to all Belgian credit institutions – exemption policy regarding Article 36bis of the Royal Decree of 23 September 1992 concerning the annual accounts of credit institutions, investment firms and management companies for collective investment schemes

Madam,
Sir,

Following its uniform letter of 18 November 2014 setting out the new exemption policy regarding Article 36bis of the aforementioned Royal Decree of 23 September 1992, the National Bank of Belgium specifies the following practical application modalities, valid during the transitional period from 01/01/2016 to 31/12/2021:

1) The transitional measures primarily concern existing hedging instruments as of 31/12/2015, which will continue to benefit from previous exemptions until 31/12/2021 subject to the submission to the Bank of the attached questionnaire duly completed by 31/03/2016 and compliance with the grant criteria specified initially. These elements will be verified by the institution's auditor.

2) New hedging instruments acquired from 1 January 2016 and concluded within the framework of strategies explicitly benefiting from a previous exemption to the new policy may also be accounted for pro rata within the framework of dynamic balance sheet management provided that
a. the institutions can demonstrate that the strategy in question was covered by the initial exemption; b. and that documentation containing the results of the effectiveness tests provided for by the new policy is made available to the auditors quarterly.

THE GOVERNOR
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These tests will be carried out with respect to the entire covered portfolio (thus including existing coverages before 01/01/2016).
These tests will not, however, be automatically binding before 1 January 2022 but must be followed closely as indicated below, the objective being to ensure monitoring of the transitional phase.
Hedging transactions for which, during the transitional period, the effectiveness criteria required by the new exemption policy are not met must, in order to continue to be recorded pro rata during the transitional phase:
a. be justified on a quarterly basis in the documentation submitted to the auditors in order to demonstrate the temporary or technical nature of these exceedances; b. be the subject of corrective measures by the institution in order to bring the inefficiency within acceptable limits. Any unjustified structural exceedance or exceedance estimated as abnormal by the auditors will be examined by the Bank within the framework of its prudential monitoring.

3) Any other hedging instrument acquired from 01/01/2016 is automatically subject to the new exemption policy. The file to be transmitted to the Bank must demonstrate compliance with each of the criteria set out in the new policy and must have been verified in advance by the institution's auditor.

A copy of this letter is sent to the commissioner(s), approved auditor(s) of your institution.

We ask you to accept, Madam, Sir, the expression of our distinguished consideration.

Jan Smets

Annex: 1