Foreign exposures of the Dutch financial sector fell by almost EUR 11 billion in the fourth quarter of 2013. This decline was observed at Dutch banks as well as insurers. Pension funds’ foreign exposures increased by EUR 13.8 billion.
In the fourth quarter, foreign exposures of banks in the Netherlands fell by almost EUR 20 billion (-2%), mainly reflecting a reduction of their exposures to euro area countries and the United Kingdom. Insurers also saw their foreign exposures drop (-EUR 5 billion, -2.8%), the decline being attributable to the euro area. Pension funds increased their international exposures by almost EUR 14 billion, mainly to countries in the euro area but also to the United States.
Chart 1: Exposures of the Dutch financial sector to selected countries (in EUR billion)
The Dutch financial sector as a whole saw a slight increase (+EUR 0.5 billion) in its exposures to the euro area (excluding domestic exposures). As banks and insurers decreased their exposures by EUR 6 billion and EUR 2.4 billion, respectively, the increase was entirely attributable to pension funds. Dutch banks reduced their exposures to the euro area’s core countries, including France and Germany. Exposures to Italy and Spain also decreased. At the same time they increased, albeit to a very limited extent, their exposures to smaller peripheral countries of the euro area, such as Cyprus, Greece and Portugal. As pension funds purchased more bonds from the Italian State, the financial sector’s exposures to this country increased.
Outside the euro area, exposures to the United States increased (+EUR 3.3 billion, Chart 1), again driven mainly by pension funds (+EUR 5.2 billion). This was primarily a result of price gains on the US stock exchanges rather than of transactions. Moreover, the lower exchange rate of the US dollar dampened the value of pension funds’ securities holdings, in the same way as banks’ claims in US dollars dampened their exposures. By the end of 2013, the financial sector’s exposures to the United Kingdom had decreased by almost EUR 12 billion. Banks in particular reduced their exposures to UK banks and the government (including the Bank of England).
Grouped by the counterparty’s sector, exposures to the private sector increased by EUR 3.1 billion in the fourth quarter. This increase was observed in most euro area countries (excluding the Netherlands), with the exception of Spain and Belgium. Total exposures to the public sector fell by EUR 1.3 billion. Insurers sold German government bonds in connection with the acquisition of mortgage loan portfolios (Chart 2). In addition, the prices of these bonds fell. By contrast, pension funds purchased government bonds from France (+EUR 2.2 billion) and from Spain (+EUR 1 billion). In Spain, pension funds anticipated declining risk premiums on government debt. The sentiment is now more positive as economic activity is picking up and the country’s competitive position is improving.
Chart 2: Exposures of the Dutch financial sector to foreign governments (in EUR billion)
Exposures to foreign banks decreased by EUR 12.6 billion. Dutch banks reduced their exposures, mainly those to banks in the United Kingdom. This is a recurring phenomenon, with banks reinforcing their balance sheets at year-end.