The volume of lending by what are known as other non-bank financial intermediaries (OFIs) has continued to decline over the past two years. Whereas OFIs still had almost €300 billion of loans outstanding at the end of the first quarter of 2022, this had fallen to over €256 billion by the end of the first quarter of 2024. This is according to new OFI sector statistics which DNB started publishing this month.
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'Other financial intermediaries' are a sector in which a number of institutions target their lending specifically on households and small and medium-sized enterprises. In particular, these are securitisation vehicles, finance companies and specialised financial institutions.
They provide residential mortgages, consumer loans and business loans. Lending plays a minor role for securities and derivatives traders, which are also part of the OFI sector.
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.
Securitisation vehicles (special purpose vehicles – SPVs) are the largest players in this sector in terms of balance sheet size. Banks typically set up these institutions to securitise (take over) residential mortgages and other loans they have issued. This allows them to free up funds for additional lending.
Whereas SPVs still had €175 billion of loans outstanding in the first quarter of 2022, this had fallen to €135 billion by the end of the first quarter of 2024.
The decline matches the trend that has been visible for some time: back in 2010, SPV lending still peaked at €377 billion. The downward trend observed since then is mainly related to the emergence of other favourable forms of bank funding. The borrowing facilities provided by the European Central Bank (ECB) may have played a role in the past few years, while the increasing issuance of covered bonds seems to suggest these are a structurally more appealing alternative: in 2010, when SPV lending peaked, the volume of outstanding covered bonds stood at €40 billion, only to rise almost every year thereafter, to reach €218 billion in the first quarter of 2024.
Securitisations involve the bundling of loans, which are then repackaged as bonds through special purpose vehicles (SPVs). In the Netherlands, these involve predominantly residential mortgage loans. The associated bonds are called ‘Residential Mortgage-Backed Securities’ (RMBS). Their repayment is based only on claims on the underlying residential mortgages.
Covered bonds are debt securities issued by banks; in the Netherlands these are backed by residential mortgages and remain on a bank's balance sheet. Purchasing these bonds gives investors a claim on the collateral (the residential mortgages) and on the bank that issued them.
Specialist financial institutions also saw lending volumes decline, from €17 billion to €10 billion. Specialist finance companies include real estate firms, liquidity providers (treasury centres) and private equity firms.
Among finance companies, which are the second largest lenders among OFIs after securitisation vehicles, lending volumes remained roughly unchanged over the past two years, currently standing at €107 billion. Finance companies provide loans directly to households and businesses, such as mortgage lenders and leasing companies.
Despite the decline in OFI lending the sector remains an important player in the Netherlands. Its balance sheet total is currently around €400 billion, making it comparable in size to the Dutch insurance sector and equivalent to 40% of the Netherlands gross domestic product (GDP). OFIs cover about 10% of all non-bank financial intermediaries, which also include pension funds, insurers and investment funds.
Among the OFIs, securitisation vehicles are the largest sub-sector, with a balance sheet total of over €158 billion, followed by finance companies (€141 billion), specialised finance institutions (€53 billion) and securities and derivatives traders (€44 billion).
Starting this month, we publish uniform balance sheet data on other financial intermediaries, providing a breakdown by the sub-sectors referred to above. These balance sheets present data from the first quarter of 2022. We will expand these publications in the period ahead. Next month, we will start publishing a table providing the geographical breakdowns of OFI assets and liabilities.
As we launch these new tables, we will discontinue the old-format tables for securitisation vehicles. Their data will be included in the new tables and in newly structured SPV-specific tables that we start publishing next quarter.
More information:
Table 9:1: Other financial intermediaries balance sheet
Dashboard: Non-bank financial intermediation (NBFI)
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