The coronavirus is having a significant impact on the economy. This shock is felt initially in the real economy before being transmitted to the financial sector and markets. It is crucial that the financial sector continues to function properly to minimise the economic impact of the coronavirus. Despite these difficult times, the financial sector is currently playing an important role in supporting the economy. Together with the authorities in the Netherlands and abroad we are monitoring the situation closely and responding swiftly to developments.
The financial sector is currently being affected in several ways, first and foremost due to the practical restrictions which institutions themselves have to contend with. Many employees are currently working from home, for example. Financial institutions have activated their business continuity plans. Staff are working from home as much as possible and people responsible for the same critical functions are no longer working together in the same physical space. This allows the continued provision of crucial services.
There are also financial consequences that are impacting each part of the sector in specific ways. In recent weeks DNB has joined with other national and international authorities in taking measures to help the financial sector to continue as effectively as possible to perform its critical function at the present time, that of supporting the real economy. Supervisory contact with institutions has also been intensified. Institutions are also being urged to report any problems to the supervisory authority in good time.
At this stage it is impossible to predict how the coronavirus crisis will develop and what the ultimate consequences will be for the financial sector. We are keeping open the option of taking further measures as the situation requires. We will of course provide further details at the appropriate time.
Details of the measures relating to banks can be found below.
- Capital relief measures
- Operational measures
- Ongoing responsibility for anti-money laundering controls
- Further extension of submission deadline for Integrity Risks Questionnaire 2020
Check our website for the latest position: www.dnb.nl/corona.
Capital relief measures
In recent weeks DNB and the ECB (in consultation with the EBA and the BCBS among others) have taken important capital relief measures to enable banks to provide additional financing for the economy. For example, it has been decided that banks can use their P2G funds, lower-quality capital can be used to meet banks’ P2 requirements, the systemic buffers for major Dutch banks have been lowered and the implementation of a floor for risk weighting of mortgage loans has been temporarily deferred. The ECB has also decided to postpone the issuance of new TRIM and internal model decisions and to give banks a further six months to make previously imposed improvements to their internal models.
These measures will better enable banks to mitigate the impact of the coronavirus outbreak. This released capital must be used to support lending. These measures must not be used for dividend distributions, variable remuneration or share buybacks. We therefore fully support the ECB's recommendation of 27 March calling on banks to pay no dividend in respect of 2019 and 2020 at least until 1 October 2020 and not to undertake any share buybacks. This call was also reiterated by the EBA on 31 March. It is positive to note that a substantial number of banks have already heeded this call.
Various operational measures have also been taken. For example, a number of data requests have been deferred and banks are being given more time to supply data for certain reports. Banks have been informed about this individually by letter.
However, it is important that banks continue to measure risks properly, particularly at this time. They must therefore maintain efforts to submit reports fully and promptly. Banks are urged to inform their supervisory authority in good time about any problems they encounter. An open dialogue is important.
The above does not include all the measures taken hitherto at national, European or global level. A summary of the capital relief and operational measures taken has now been published on the DNB website. This summary will be periodically updated and any new measures will be added.
Ongoing responsibility for anti-money laundering controls
As well as supporting the economy, banks have ongoing responsibilities at this time. One such responsibility concerns financial crime. Banks must continue to ensure that the financial system is not abused for money laundering or terrorist financing. In that regard it is important to take account of new risks and patterns of financial crime resulting from the coronavirus crisis.
Further extension of submission deadline for Integrity Risks Questionnaire 2020
The Integrity Risks Questionnaire 2020 was sent to all banks on 31 March 2020. In connection with government measures to limit the spread of the coronavirus, the 12 May deadline for response had already been extended to 26 May 2020. Following the government’s announcement on 31 March that the above measures would be extended, we have further extended the submission deadline for all banks to 15 June 2020. The deadline extension should mean that banks will not need to make individual requests to extend the deadline.