Overview Supervision
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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: Call for review of preferential treatment of sovereign exposures in the capital framework
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Phasing out the current preferential treatment of sovereign exposures in the capital framework for banks is important particularly for Europe. The EU must now take the lead in responding to a discussion paper of the Basel Committee on Banking Supervision on this topic. The interconnectedness of banks and governments was one of the determining factors in the European sovereign debt crisis and its reduction must remain ongoing.
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- DNBulletin: Basel Committee completes post-crisis bank regulation reforms
- The Basel Committee on Banking Supervision today reached agreement on a new framework for calculating capital requirements for banks. This will create more uniformity in the ways in which banks calculate their capital buffers. We believe the agreement is an important milestone marking the completion of the reforms of the global bank regulation framework, ten years post-crisis.
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- DNBulletin: Limited interest from euro area investors for European contingent convertible bonds (CoCos)
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The market for CoCos in the European Union is a young, expanding market. CoCos are hybrid bonds that are designed to absorb losses if a bank's capital falls below a predefined limit. DNB research shows that most investors in European bank CoCos are from outside the euro area.
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- Enhanced bank resolvability through resolution and deposit guarantee scheme
- De Nederlandsche Bank (DNB) is taking important steps in developing a new approach for failing banks. The objective is resolvability: banks must be allowed to fail without threatening financial stability. To that effect, resolution strategies have been determined for the largest Dutch banks should they get into trouble. Good progress is being made in developing the toolkit for DNB to execute an actual resolution. The enhancement of the deposit guarantee scheme (DGS) also underpins public confidence in the banking sector. The DGS payout term is being reduced and the creation of a fund increases the financing capacity of the DGS.
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- DNBulletin: Supervisory approach to behaviour and culture in the boardroom is bearing fruit
- For the past five years, supervision of behaviour and culture has been part of DNB's supervision of the Dutch financial sector, and both executive and supervisory directors have been made more aware of the importance of behavioural and cultural aspects in decision-making. Supervision of behaviour and culture has proved to be a valuable supplement to the more traditional forms of supervision, as it addresses the causes of behaviour that impacts on the performance and risk profile of financial institutions and consequently on financial stability. Although the financial sector in the Netherlands has taken steps in the right direction, there is still some way to go.
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- New policy rule on suitability contributes towards improving the quality of management in the financial sector
- The new policy rule for suitability screening of executives in the financial sector has led to more vigorous screening procedures. The new approach is proving to be effective in contributing towards improving the quality of management and internal supervision at financial institutions.
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- Long-term viability of life insurers examined
- DNB is urging insurers to look to the future and adapt their business models in order to ensure that they can continue meeting their long-term commitments to policyholders. This is because the life insurance market is under pressure. Traditional sources of profit are drying up and cost savings are urgently required. DNB is currently discussing these developments with the sector.
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- Macroprudential policy - taking steps forward
- On 4 November 2014, the European Central Bank (ECB) will assume responsibility for supervising the European banking sector. Together with the national authorities in the euro area, the ECB will also take up its role in implementing macroprudential policy. This will enable them to address macro-financial imbalances, which are often of a national nature, such as excessive credit growth and an oversized financial sector. Recent insights show that macroprudential policy can be particularly effective in Europe.
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- Sound supervision means looking ahead
- One of the major lessons learned from the financial crisis is that we have to look ahead. In particular, we need to look beyond the bare figures. Consequently, supervision of conduct and culture, business models and strategies of financial institutions have been the focal points of DNB's supervision, and will continue to be so in the new Supervisory Strategy 2014-2018 .
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- European banking supervision is on its way
- The preparations for the launch of the Single Supervisory Mechanism have entered their last, crucial phase. Prior to the launch of the new banking supervision regime, the 130 largest European banks will be subjected to a large-scale examination next year.
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- DNBulletin: New macroprudential instruments for DNB
- As of 2014, De Nederlandsche Bank (DNB) will have new instruments at its disposal that will explicitly give substance to its stability task. They include a capital buffer for systemic banks and a counter-cyclical buffer, which make capital requirements for banks dependent on credit growth. These instruments will allow DNB to deliver an active contribution to the stability of the Dutch financial system.
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- Banking supervision to Europe – outcome of Euro summit
- The European Council has taken a major step towards creating a European banking union and has reached agreement about banking supervision at a European level. It is important that a European resolution mechanism is introduced simultaneously with the implementation of European supervision. This mechanism should ensure that bank failures are settled in an orderly fashion.
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- The value of an independently functioning Supervisory Board
- The Supervisory Board is the internal supervisor of an undertaking. An important lesson from the financial crisis is that an adequate degree of independence is a precondition for the quality of this internal supervision. In exercising financial supervision DNB therefore assesses whether the Supervisory Board functions independently. DNB focuses on three elements of independence: Can a Supervisory Board member make independent decisions, does he appear to function independently and is he formally independent.
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- A new step towards manageable systemically important banks
- In 2010 DNB tightened its supervisory policies for the systemically important banks (SIBs) in the Netherlands. As part of its tighter supervision and on the basis of information supplied by banks, DNB will lay down how the critical economic activities of an SIB can be safeguarded if a bank is on course for failure and there is no prospect of an independent recovery. The objective is to reduce the risks for financial stability and the taxpayer.
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