- Overvaluation of real estate appraisals
Reliable appraisals are crucial for the proper valuation of residential and commercial real estate and hence for the effective operation of the financial system. Since several stakeholders have expressed their concerns about the quality and independence of residential property appraisals, DNB decided to examine the quality of such appraisals. In around 95% of cases, the appraisal value was equal to or higher than the purchase price of the residential property. This is a clear indication of systematic overvaluation.
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- Dutch financial sector also faces environmental and social risks
A recent report issued by De Nederlandsche Bank (DNB) reveals that the Dutch financial sector is exposed not only to climate-related risks, but also to other environmental and social challenges. Water stress, raw material scarcity, biodiversity loss and human rights controversies also present risks. The DNB study also shows that financial institutions show ambition in the area of sustainability, but they could take further action to integrate those ambitions into their operational management.
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- DNBulletin: New version of DELFI simulation tool
- DNB has updated its DELFI simulation tool, which allows one to simulate future paths for the Dutch economy. The simulations provide insights into the effects of changes in economic policy or the (international) economic environment on the economy of the Netherlands. The reason for the update is that the underlying model of the Dutch economy has been revised.
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- DNBulletin: Brexit-related risks and preparations in the Dutch financial sector
A DNB survey into preparations for a possible no-deal Brexit held among selected Dutch banks, insurers, pension funds and asset managers shows that the majority of Dutch financial institutions are planning for Brexit. In terms of depth and focus their contingency plans vary with the specific risks they face and their exposure to customers and counterparties based in the United Kingdom. In this phase, Dutch financial institutions have not yet activated the measures in their plans on a large scale. DNB will continue to address this subject in our dialogue with the sector.
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- DNBulletin: Stress test shows vulnerabilities of European insurers
- Dutch insurance groups are relatively sensitive to further decreases in interest rates compared with average European peers. By contrast, they are less sensitive to a sudden rise in interest rates combined with falling asset prices. Also, they are resilient to several catastrophe scenarios. This is apparent from the results of a new stress test published today by EIOPA, the European supervisory authority for insurers and pension funds. The Dutch insurance groups’ high sensitivity to lower interest rates is due mainly to their relatively concentrated exposure to long-term life insurance policies.
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- DNBulletin: PSD2 – fundamental change in banking services
On 4 December, the Dutch Senate adopted the bill to implement the European Payment Services Directive (PSD2) in the Netherlands. PSD2 promotes competition and innovation in the payment system. Banks must allow new service providers access to their customers' payment accounts, subject to the customers’ consent.
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- DNBulletin: Trade war between the United States and China – who wins and who loses?
A trade war between the United States and China is set to cause serious damage to both countries. The euro area may be able to benefit temporarily, provided it does not get involved.
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- DNBulletin: Cash or card? The customer decides
- In the Netherlands, most retailers give their customers a choice in how they pay for their purchases. Consumers pay by debit card more often than with cash, but cash is still the most widely accepted means of payment: 96% of Dutch retailers accept payment in cash, against 82% that accept debit cards. Most retailers expect they will still accept cash payments in 2022. This emerges from a survey held among more than one thousand Dutch retailers commissioned by De Nederlandsche Bank.
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- DNBulletin: Impact on the Dutch economy from carbon tax expected to be manageable
- A broadening or increase of the tax that corporations pay on their greenhouse gas emissions does not have to exert a major impact on the Dutch economy as a whole. Profound effects may, however, occur in a number of specific industry sectors. These effects may be partly cushioned by using the carbon tax revenues to give a financial impetus to the transition to cleaner technologies.
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- DNBulletin: Share of POS debit card payments breaks 60% barrier
- In the past six months, consumers paid 61% of their purchases at shops, petrol stations, pubs, restaurants, hotels and other retail outlets by debit card and 39% in cash. It marks the achievement of the 60% debit card/40% cash target that banks and retailers agreed in 2014 when the percentages were still reversed. This emerged from a joint study undertaken by the Dutch Payments Association and De Nederlandsche Bank into consumers' point-of-sale (POS) payment methods. The agreements to promote debit card use were made in the context of the Covenant on the Payment System, with a view to improving the payment system's security and efficiency.
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- DNBulletin: Lower capital buffers for sustainable finance are only an option if sustainable finance carries lower risk
- Banks need robust capital buffers that are appropriate to the risk levels of their exposures. DNB believes that lowering capital buffers by introducing a green supporting factor in an effort to boost sustainable finance would be premature. Lowering capital buffers would only be an option based on sufficient evidence that green exposures carry lower risk. At present, no such evidence exists. Through the Network for Greening the Financial System (NGFS), an international group of supervisory authorities and central banks, we are currently researching the risks related to green and "brown" exposures. The effectiveness of supporting factors in general could also be questioned.
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- DNBulletin: Strong rise in income for cyclically-sensitive self-employed
- During the current boom period, income development for the self-employed, who represent a substantial part of the active working population, has been more favourable than for employees. As a result, total income development in the business sector is underestimated if only the income development of employees is considered.
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- DNBulletin: Time to revisit crisis liquidity support
- The liquidity support the Eurosystem provided to banks during the financial crisis was necessary, but also had unintended consequences. This support ended up with a small proportion of the banks. They also continued to make use of it for a long time, even when the market situation became more normal. Liquidity support has thus been associated with weakened market discipline and failure to make the necessary balance sheet adjustments. Adjusting the existing monetary policy framework could prevent this from happening again in the future. The creation of a separate facility with specific conditions for providing extended liquidity support is also worth considering. These recommendations stem from an evaluation of the support operations conducted in recent years. The recent DNB Occasional Study [Revisiting the central bank’s lender of last resort function] provides further details.
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- DNBulletin: Recovery of pension funds: improved outlook for index-linking
- Due to solid returns, 2017 saw a marked improvement of pension funds' financial positions. This allows most pension funds to apply partial or even full indexation of pensions again. However, several pension funds, including some of the largest ones, did not manage to meet the minimum own funds requirement. This means that if these pension funds fail to recover in time, they will be forced to curtail pensions in 2020 or 2021. According to their recovery plans, the pension funds expect to eliminate their deficit through surplus returns on investment – as they did in previous years.
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- DNBulletin: DNB experiments with blockchain technology
Blockchain technology as yet fails to meet the very high demands of a financial market infrastructure. The experiments we carried out with this technology led us to this conclusion. Among the principal limitations are capacity shortages, inefficiency caused by high energy consumption, and a lack of full certainty that a payment is completed. However, blockchain technology could improve a financial market infrastructure's resilience to external attacks, at the expense of its capacity and efficiency.
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