DNB publishes December 2009 Quarterly Bulletin
Press release
| Date | 16 December 2009 |
The Quarterly Bulletin opens with its regular reports on economic developments, prudential supervision of the financial sector and payments.
Other key topics covered are:
- Adjustments to the Basel banking supervision framework
- A closer look at pension funds’ investment policies
- Cutbacks and growth
- Cash payments tallied
- Bank failures in historical and international perspective
- Tighter risk management in banks’ trading rooms
- Tough times for commercial property market
- The importance of macroprudential supervision
- Economic developments and prospects for the Netherlands
Adjustments to the Basel banking supervision framework
In response to the financial crisis, the Basel Committee on Banking Supervision has tightened the capital framework for banks. The quality of bank capital will be subject to stricter requirements and banks will need to hold substantially more capital against the risks attached to complex financial products. The capital framework will be supplemented by a simple capital measure that indicates the size of the balance sheet in relation to the capital reserves. The rules for liquidity management will be tightened too.
A closer look at pension funds’ investment policies
Many pension funds have underestimated the risks of their investment policies and pay inadequate attention to the governance and management of investment risks, according to research conducted by DNB in 2009. The research covers a period of severe market turbulence but the research results are largely unrelated to the crisis. This has prompted DNB to act to improve risk management at pension funds, partly in cooperation with the sector. DNB will also advocate changes in the legal framework.
Cutbacks and growth
The financial and economic crisis has hurt the Netherlands badly. Not even during the Great Depression of the 1930s did we see such a steep fall in economic activity within a single year nor was the damage to the fiscal deficit so serious as it is now. To curtail the expected rise in debt levels, the deficit must be reduced by 1 percentage point annually as of 2011, entailing a severe austerity exercise.
Cash payments tallied
Dutch people made some 5.5 billion cash payments in 2007, DNB research found. Cash is thus still the most commonly used means of payment at points of sale, although electronic forms are gaining ground. Changing payment habits between 2002 and 2007 have yielded annual cost savings of EUR 100 million in 2007.
Bank failures in historical and international perspective
Three banks have collapsed in the Netherlands since the credit crisis. Nonetheless, bank failures are relatively rare. In comparing failures in the banking sector with those in other sectors we should bear in mind that the authorities are more likely to intervene in the banking sector to prevent failures. Policy makers are now working on measures that will prevent systemic banks from requiring public support and allow for an orderly unwinding.
Tighter risk management in banks’ trading rooms
Banks worldwide suffered huge losses in their trading books during the crisis. Dutch banks also sustained sizeable trading losses, although the risks had seemed contained before the crisis. An important lesson of the crisis is that the risks attached to trading portfolios are larger and more complex than previously assumed. Both the institutions and the supervisor need to reverse their thinking on trading risks.
Tough times for commercial property market
The global commercial property market saw a turnaround this year. The number of transactions fell sharply and prices dropped in many countries, generally by high percentages. This dealt a heavy blow to financial institutions.
The importance of macroprudential supervision
The credit crisis is a system crisis in which financial institutions have been hit by a series of market-wide and cross-sectoral, cross-border shocks. One of the lessons of the crisis is that system-wide or ‘macroprudential’ supervision should be reinforced. Various international initiatives are now under way.
Economic developments and prospects for the Netherlands
Short-term prospects for the Netherlands have improved but the overall picture remains gloomy. Following a 4% contraction in 2009, a slow recovery is expected, with a growth rate of 0.7% in 2010 and 1.2% in 2011. Unemployment will continue to rise and inflation will stay low. Given the weak economy, a fall-off in corporate lending cannot be ruled out.
End of press release.
For more information please contact Tobias Oudejans (tel. + 31 20 524 3100 or +31 6 524 96 961) or Herman Lutke Schipholt (tel. +31 20 524 2712 or +31 6 524 96 900).
