Dutch non-bank financial services providers provided €401 billion in financing in 2021, 14% less than in 2020. This left the sector as large as one-sixth of the Dutch banking system, accounting for 1% of global non-bank financing. This is according to figures from our analysis for the Financial Stability Board, which is publishing its global results later this month.
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Some financial institutions provide services that closely resemble those of a bank, while formally they are not banks (see box). These include, for example, finance companies that provide mortgage loans or consumer loans, or investment funds that invest in bonds or loans. Financing by these so-called non-bank financial intermediaries in the Netherlands fell by €67.5 billion to €401 billion in 2021.
At De Nederlandsche Bank, we independently compile statistics on the Dutch financial sector and economy. This article is based on these statistics. More information on our statistics and all dashboards can be found on our Statistics homepage.
Non-bank financing includes financing by institutions that engage in activities that expose them to bank-like risks through liquidity and maturity transformation and leverage (raising relatively high amounts of borrowed capital), but fall outside prudentially consolidated banking supervision. Previously, such institutions were also referred to as shadow banks.
Financing by these parties provides an alternative source for the economy and can thus increase its shock resilience. However, it is important to pay close attention to the build-up of potential new financial stability risks. This is why the Financial Stability Board (FSB) monitors this “non-bank financial intermediation” (NBFI) annually in its NFBI framework. Below, we refer to the FSB’s narrow measure of NBFI as non-bank financing.
The decline in non-bank financing occurred mainly in what are known as open-ended investment funds. These are funds from which investors can easily divest. At these institutions, financing fell 18% to €302 billion. This was largely accounted for by bond funds affiliated to pension funds. Pension funds withdrew bonds from these investment funds to hold them in-house. These institutions say this allows them to take more control over their own investments, for example in the area of sustainability. The risk of sudden withdrawals seems low in practice due to the structure of the investment funds. These investment funds are nevertheless included in the FSB's NFBI framework because changes in pension funds' strategic investment policies may affect them. The intermediation role of investment funds entails additional risks such as liquidity risks, which do not otherwise arise in pension funds.
In contrast, at the same time, mortgage funds increased 20% to €79 billion within the investment fund category. This mainly concerns investments of pension funds that may want to benefit from higher returns and match their longer-term liabilities.
Despite the net decrease in financing, investment funds continue to account for the vast majority (75%) of non-bank financing.
Although the outstanding amount of securitisations has shown a declining trend over the past decade, it showed a 1% uptick to €59 billion in 2021. Securitisations involve the bundling of loans extended to households and businesses, which are then repackaged and sold as bonds through dedicated securitisation firms. Its growth in 2021 is partly due to securitisations of buy-to-let mortgages, which are mortgage loans granted to individuals who buy homes to rent them out.
The other two categories are relatively small. The balance sheet size of securities and derivatives dealers trading on their own account, such as flash traders, increased by 9% to €23 billion. The size of finance companies fell by 22% to €18 billion, driven by a restructuring at a large institution. While new lenders have entered the Dutch market, as a whole they are still relatively small.
Monitoring developments in NBFI is an important part of national and international authorities' efforts to increase the resilience of the financial system.
To provide more insight into NBFI data, we are therefore launching new NBFI tables and a new NBFI dashboard, which includes an overview of the size of non-bank financial intermediation in the Netherlands and various graphical representations.
More information
Tabel 16.1: Size of non-bank financial intermediation (NBFI)
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