Trends in Finance and Finance
Technology
Prof. Pieter Desmedt
Gabriel Gonzalez-Lopez
2025-2026
1
,Trends in Finance and Finance Technology 1
S1 - Risk Management in Banking 3
S2 - Credit Risk Management 8
S3 - The Role of the CRO & CFO 13
S4 - Capital Markets 16
S5 - Financial Service’s Future in AI Age 21
S6 - ESG & Financial Institutions 23
S7 - IA in Banking (Including mlOps) 27
S8 - Finance Technology 33
S9 - Geopolitical Risks 41
S10 - Audit Presentation 47
S11 - Model Risk 53
S12 - Cyber Security 59
S13 - Credit Ratings 64
2
, S1 - Risk Management in
Banking
Introduction to banking and a Banks balance sheet
Introduction to banking
The core metier of a banker is to act as a nancial intermediary between parties in de cit (who need
funding for productive investments) and parties in surplus of cash (who have savings). The main income of
a bank comes from transferring these funds and turning deposits into loans. Generating an interest
margin between the collected savings and the granted credits is the heart of the banking industry.
This intermediation implies transformations, as there is never a perfect match between assets and
liabilities in terms of time, size, and currency. This
creates both pro t and RISK.
• Assets and Liabilities Management
(ALM): A crucial element of ALM is
managing the duration gap, which is a
key risk that banks need to carefully
control. Banks must be extremely careful
regarding the mismatch of xed and
exible interest rates between their
assets (e.g., long-term mortgage loans)
and liabilities (e.g., short-term savings
accounts).
• Key Risks & Liquidity: The three main
risks in a banking environment are
duration gap risk, interest rate risk, and liquidity risk. To manage liquidity risk, maintaining
securities (such as government bonds) is very important to keep a little liquidity available. On the
funding side, consumer deposits represent the biggest source of funding for banks. Banks also
heavily utilize derivatives to hedge against duration mismatches and interest rate risks.
3
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, Increasing vs. Decreasing Interest Rates: Changes in interest rates signi cantly impact a bank's
pro tability.
• Decreasing rates: Put pressure on the interest margin. The costs that banks charge for services
(like bank cards) are largely due to the decrease in interest rates, which squeeze their traditional
margins. Furthermore, in an environment of falling rates, retail clients often repay their mortgages
early, adding extra pressure.
• Increasing rates: In theory, the margin between short-end and long-end rates goes up, increasing
income. However, in Belgium, retail clients are very well protected (e.g., oating mortgage rates
can maximally double). A major challenge is the conversion of long-term assets: when interest
rates rise, the new, higher rates only apply to new products. It takes a long time to transfer short-
term assets to long-term ones, and in the meantime, the bank is going to "bleed" nancially
because it must pay higher rates on deposits immediately while its old mortgages yield low xed
rates. This was notably seen in Belgium in 2023 with the "Van Peteghem bond", where retail banks
matched the high government coupon (taking a P&L hit) while larger universal banks absorbed the
liquidity out ows.
Balance sheet of a bank
The income statement of a bank is driven by Net Banking Income (Net Interest Income + Net Fee and
Commission Income + Net Trading Income) minus Total Operating Expenses, which gives the Gross
Operating Result. After deducting impairments and
provisions (such as expected losses on mortgages), you
arrive at the Pro t Before Tax. The balance sheet
structure of Belgian banks is predominantly composed
of deposits by, and loans to, households and non-
nancial corporations, making up nearly 60% of total
assets and liabilities.
4
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Technology
Prof. Pieter Desmedt
Gabriel Gonzalez-Lopez
2025-2026
1
,Trends in Finance and Finance Technology 1
S1 - Risk Management in Banking 3
S2 - Credit Risk Management 8
S3 - The Role of the CRO & CFO 13
S4 - Capital Markets 16
S5 - Financial Service’s Future in AI Age 21
S6 - ESG & Financial Institutions 23
S7 - IA in Banking (Including mlOps) 27
S8 - Finance Technology 33
S9 - Geopolitical Risks 41
S10 - Audit Presentation 47
S11 - Model Risk 53
S12 - Cyber Security 59
S13 - Credit Ratings 64
2
, S1 - Risk Management in
Banking
Introduction to banking and a Banks balance sheet
Introduction to banking
The core metier of a banker is to act as a nancial intermediary between parties in de cit (who need
funding for productive investments) and parties in surplus of cash (who have savings). The main income of
a bank comes from transferring these funds and turning deposits into loans. Generating an interest
margin between the collected savings and the granted credits is the heart of the banking industry.
This intermediation implies transformations, as there is never a perfect match between assets and
liabilities in terms of time, size, and currency. This
creates both pro t and RISK.
• Assets and Liabilities Management
(ALM): A crucial element of ALM is
managing the duration gap, which is a
key risk that banks need to carefully
control. Banks must be extremely careful
regarding the mismatch of xed and
exible interest rates between their
assets (e.g., long-term mortgage loans)
and liabilities (e.g., short-term savings
accounts).
• Key Risks & Liquidity: The three main
risks in a banking environment are
duration gap risk, interest rate risk, and liquidity risk. To manage liquidity risk, maintaining
securities (such as government bonds) is very important to keep a little liquidity available. On the
funding side, consumer deposits represent the biggest source of funding for banks. Banks also
heavily utilize derivatives to hedge against duration mismatches and interest rate risks.
3
fl fi fi fi fi
, Increasing vs. Decreasing Interest Rates: Changes in interest rates signi cantly impact a bank's
pro tability.
• Decreasing rates: Put pressure on the interest margin. The costs that banks charge for services
(like bank cards) are largely due to the decrease in interest rates, which squeeze their traditional
margins. Furthermore, in an environment of falling rates, retail clients often repay their mortgages
early, adding extra pressure.
• Increasing rates: In theory, the margin between short-end and long-end rates goes up, increasing
income. However, in Belgium, retail clients are very well protected (e.g., oating mortgage rates
can maximally double). A major challenge is the conversion of long-term assets: when interest
rates rise, the new, higher rates only apply to new products. It takes a long time to transfer short-
term assets to long-term ones, and in the meantime, the bank is going to "bleed" nancially
because it must pay higher rates on deposits immediately while its old mortgages yield low xed
rates. This was notably seen in Belgium in 2023 with the "Van Peteghem bond", where retail banks
matched the high government coupon (taking a P&L hit) while larger universal banks absorbed the
liquidity out ows.
Balance sheet of a bank
The income statement of a bank is driven by Net Banking Income (Net Interest Income + Net Fee and
Commission Income + Net Trading Income) minus Total Operating Expenses, which gives the Gross
Operating Result. After deducting impairments and
provisions (such as expected losses on mortgages), you
arrive at the Pro t Before Tax. The balance sheet
structure of Belgian banks is predominantly composed
of deposits by, and loans to, households and non-
nancial corporations, making up nearly 60% of total
assets and liabilities.
4
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