Dutch banks' securities portfolio significantly down

Statistical news
Datum 8 april 2016

In 2015, the combined securities portfolio of banks established in the Netherlands shrank by 16%. By year-end 2015, the aggregate market value of all securities that banks held for their own account and risk had fallen to EUR 344 billion, from EUR 410 billion as at year-end 2014, representing 13.8% of total Dutch banking assets, which stood at some EUR 2,500 billion.

At year-end 2014, the combined securities portfolio represented 16.7% of total banking assets. Securities portfolios comprise three categories of securities: capital market paper (long-term debt instruments), money market paper (short-term debt instruments) and equities (including units of participation held in investment and money market funds). All three categories declined in 2015, with equity and money market paper portfolios showing the biggest fall-off (see Chart 1).   

Chart 1: Securities held by Dutch banks, broken down by security categories, volumes and growth rates

At year-end 2015, the market value of the capital market paper portfolio stood at EUR 332 billion (year-end 2014: EUR 389 billion), while money market paper was EUR 7.8 billion (year-end 2014: EUR 14 billion) and equities EUR 4.2 billion (year-end 2014: EUR 6.5 billion).

 

As at 31 December 2015, capital market paper accounted for 97% of the total amount in securities held by banks established in the Netherlands. Since the end of 2014, the total amount in capital market paper held has gone down by 14.8%. The main cause of the decline are net sales of capital market paper, meaning the balance of their purchases and sales over a specific period. Net sales were EUR 15.3 billion in 2015. At year-end 2015, 40% of the total capital market paper portfolio were government bonds, at EUR 133 billion, EUR 43.8 billion of which were issued by the Dutch government. Dutch public debt (government bonds) was purchased under the Eurosystem's purchase programme in the amount of EUR 25.6 billion in 2015. More than 90% was purchased by De Nederlandsche Bank (DNB). The impact of the purchase programme is reflected in the banking balance sheets of the banks established in the Netherlands to a marginal extent only, the volume of Dutch government bonds remaining almost unchanged.

The volume of money market paper showed the largest decline in the securities portfolio of the banks established in the Netherlands in 2015, largely due to net sales: the banks sold money market paper worth EUR 17.2 billion on balance in 2015. However, price and exchange rate movements of money market paper were positive in 2015 (EUR 347 million combined), causing a slight increase in the portfolio's volume. In a notable development in the Dutch market for money market paper, Dutch institutions issued less in money market paper than in previous years, the volume of foreign currency issues being particularly low.

The volume of the equity portfolio held by Dutch banks also showed a sharp decrease. At year-end 2015, banks held a combined equity portfolio of EUR 4.2 billion, more than 34% down on 31 December 2014. Possible causes of such a development are price movements of the equities held, changes in exchange rates and net sales of equities. In 2015, the latter category largely explains the decrease, as Dutch banks sold equities in the amount of EUR 2.7 billion on balance. The decline in equities issued by the industrial sector is notable in particular (see Chart 2).  

Chart 2: Growth rates of equities held by banks established in the Netherlands, broken down by issuer's sector

At year-end 2014, equities issued by the industrial sector still represented 27% of the total equity portfolio. This figure had dropped to a mere 4% by 31 December 2015. Net equity sales from this sector by Dutch banks were EUR 1.8 billion in 2015, after which these banks only held EUR 168 million in such equities in the fourth quarter of 2015. Equities issued in all sectors were sold on balance, except in financial activities and the insurance sector. A bank strengthens its capital position by selling parts of its equity portfolio, which is why the stricter capital requirements imposed on banks following the crisis may help explain the net sales of equities by banks established in the Netherlands.