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Supervision should take the financial sector's heterogeneity into consideration


Published: 31 May 2018

Zonreflectie gebouw

There are indications of increased homogeneity among banks. More attention should be given to promoting heterogeneity in the financial sector, as this helps to improve financial stability. This is the conclusion of a study into proportional and effective supervision, which DNB published today. A more diverse financial sector reduces the impact of an external shock on financial stability.

Over the past ten years, banking regulation and supervision have become both stricter and more comprehensive. Necessarily so, as post-crisis regulatory reforms were needed to increase the resilience of individual banks while restoring financial stability.

As a result, the risk-absorbing capital of financial institutions has increased significantly, because banks bolstered their capital in terms of both quantity and quality. While higher capital requirements make banks safer, this does not automatically imply that the banking sector as a whole has become less sensitive to risks.

Proportional and effective supervision

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