The Role of EBA Guidelines in Private Law Disputes: Assessing Civil Fault in the Legal Framework of Belgium
In Belgium, it is well established that banks, when granting credit, have a duty to assess the borrower's creditworthiness. Failure to conduct a prudent assessment of a borrower's creditworthiness is considered a fault in a civil law context. Historically, there have been cases wherein banks were held liable by third parties when credit was granted to companies who were virtually bankrupt. Traditionally, the evaluation of a credit applicant's creditworthiness exclusively scrutinized their capacity for repayment. The European Banking Authority (EBA), in its Guideline of May 29, 2020, concerning Loan Initiation and Monitoring, mandates that banks, in the process of granting credit, must assess the borrower’s exposure to Environmental, Social, and Governance (ESG) risks. This prompts an intriguing inquiry into the potential role of these guidelines within the context of private law disputes. Specifically, this prompts the question of whether external entities possess the capacity to impute civil liability upon a bank in scenarios where credit is granted in breach of the EBA Guidelines.
The present research explores whether a failure to comply with EBA Guidelines, with a specific focus on the ESG-related obligations introduced by the EBA Guideline governing the initiation and monitoring of loans, could lead to a civil fault within the legal framework of Belgium. According to Belgian law, a civil fault arises if the behaviour in question (I) contravenes a particular statutory provision or (II) deviates from the conduct expected of a reasonably prudent person placed in the same circumstances.
Considering the non-binding nature of the EBA Guidelines, there is no doubt that non-compliance with these guidelines does not constitute a violation of a specific statutory provision, and therefore does not automatically result in a civil fault. Consequently, under Belgian law, the determination of a civil fault necessitates an evaluation of whether the conduct in question deviates with the behaviour expected of a reasonably prudent bank, operating under the same circumstances.
This paper argues that due consideration should always be given to the underlying purpose of the EBA Guidelines when assessing prudent conduct. In other words, a breach of the EBA Guidelines does not invariably lead to a breach of a bank's duty of care within the context of a private law dispute. The contention is that if the EBA Guidelines are not intended to confer rights upon banking customers, it would be inappropriate to presume that a breach of these guidelines automatically constitutes a violation of a bank's duty of care in a private law dispute between the bank and its customer.
By examining the interplay between EBA Guidelines and Belgian civil fault criteria, this research aims to contribute valuable insights to the legal assessment of financial institutions' conduct in the context of private law disputes. The findings of this study could provide guidance to policymakers, legal practitioners, and financial institutions in understanding the nuanced relationship between soft law instruments, such as EBA Guidelines, and their potential implications in the domain of private law.