The fourth quarter of 2012 saw market sentiment improve across the euro area, as did the preceding quarter.(see Dutch financial sector’s foreign exposures increase) This resulted in increasing demand for portfolio investment in the euro area. During the fourth quarter of 2012, the foreign exposures of the Dutch financial sector to the euro area increased by 1% (EUR +6 billion), whereas the sector's total foreign exposures declined by 2% (EUR -37 billion). As a result, the exposures to the euro area as a share of total foreign exposures had risen to 45% at end-December 2012, up from 44% at end September.
The increased exposure to the euro area reflects an increase in government bond holdings. In absolute terms, the strongest growth in government bond holdings was recorded for Germany (EUR +5 billion), Italy (EUR +2 billion), Belgium (EUR +1 billion), France (EUR +1 billion) and Spain (EUR +1 billion). As regards Germany, Italy, Belgium and Spain, this growth was largely the result of net purchases, supplemented by price gains. In the case of France, the expansion resulted almost exclusively from price gains. The increase in government bond holdings was mainly accounted for by pension funds and insurers, and to a lesser extent by banks. All in all, the Dutch financial sector expanded its foreign exposures to euro area sovereigns by EUR 13 billion. As a result, the overall exposure of the Dutch financial sector to euro area sovereigns (excluding the Netherlands) increased. At end-December 2012, 44% of total foreign exposure to the euro area was to sovereigns, as against 42% at end-September. A similar development is visible in exposures to the Netherlands, the United States and the United Kingdom, where exposures to general government also increased by, respectively, EUR 5 billion, EUR 6 billion and EUR 5 billion.
Balancing the increase in exposures to governments, exposures to foreign banking counterparties in the euro area declined (by EUR 7 billion during the final quarter of 2012). Declines were especially sharp in positions vis-à-vis banking counterparties in France (EUR -2 billion), Belgium (EUR -2 billion) and Germany (EUR -1 billion). At the same time, similar movements in exposures to banks outside the euro area were recorded with respect to the United Kingdom (EUR -5 billion) and the United States (EUR -3 billion).]