IMF publishes its report on financial sector and supervision in the Netherlands

Date 22 June 2011

The International Monetary Fund (IMF) today published its report on the Netherlands as part of the Financial Sector Assessment Program (FSAP). In line with its preliminary conclusions published in December, the IMF concludes that the financial sector in the Netherlands is robust.

The IMF has performed various calculations and, even under the most severe shock tested by the IMF, the financial sector has sufficient capital available to absorb the effects. Also, banks appear well placed to meet the new capital requirements under Basel III.

The IMF also examined the quality of financial supervision in the Netherlands. Its assessments show a high degree of compliance with international regulatory standards. In both the banking and insurance sector, the Netherlands complies, or largely complies, with the existing standards. The IMF also gave a favourable assessment of pensions supervision, for which no international standard exists. Moreover, the IMF notes that the Netherlands "twin peaks” model of supervision, with two separate supervisors, each with their own responsibility, is attracting strong international interest.

An FSAP is a regular (five-yearly) programme in which IMF experts analyse a country's financial sector stability and the quality of its supervisory framework. The FSAP supplements the IMF’s broader annual surveillance activities (the Article IV consultations). An FSAP provides a more in-depth and targeted examination of the financial sector.

The IMF assessments indicate that supervision in the Netherlands is internationally recognized for its solid framework. With this examination, DNB has given a follow-up to its Action Plan drawn up last year. An important component of this Action Plan was the enhancement of accountability. The IMF has an important role to fulfil in this regard because it has a recognised analytical framework and global experience. The IMF report explicitly supports the reforms that are currently carried out at DNB.

The IMF also notes potential risks, relating mainly to the international economy and the housing market. With regard to the relatively high level of mortgage debt in the Netherlands, the IMF welcomes the recent measures that are taken to set a maximum loan-to-value ratio and stimulate building up savings.

The IMF also makes ecommendations. The IMF report recommends expanding the current set of crisis instruments and reforming the deposit guarantee scheme. In addition, the IMF advises intensifying the supervision of internationally-operating groups and more structurally collecting of data. It is also important that the supervisors should be operationally independent. The IMF recommends limiting legal liability in line with countries neighbouring the Netherlands.

De Nederlandsche Bank welcomes these recommendations and will take them up in cooperation with the Ministry of Finance and the Netherlands Authority for the Financial Markets. Important steps have already been made in many of these areas, supported by proposals for legislative changes where appropriate.