DNB, together with the ECB and other central banks, is publishing new sustainability figures for the financial sector this week. Why, in fact? And what exactly are we measuring? See the Q&As below.Read more
Risks for the financial system
De Nederlandsche Bank (DNB) wants to safeguard a stable financial system. This requires sound financial institutions that operate with integrity. This is necessary to ensure a sustainable economy in the Netherlands. We warn against risks that could affect the system as a whole, and issue advice. We also improve the financial system's resilience by demanding that financial institutions reinforce their buffers.
The financial system is at the heart of the economy. It allows you to save, borrow and invest. It also ensures that you can pay safely and quickly, and that you can cover financial risks that you do not want to or are unable to bear. These things are often taken for granted, but they are essential to the functioning of the economy. That is why it is important that the financial system is robust and that it continues to function under less favourable economic circumstances.
Financial Stability Report
De Nederlandsche Bank monitors the stability of the financial system. Every six months, we publish our Financial Stability Report (FSR), in which we identify the risks to the financial system. We published the most recent version on 10 October 2022. The FSR includes a risk map showing the principal risks to financial stability in the Netherlands.
What are current the risks for the financial sector
In our latest Financial Stability Report, we note that risks to financial stability have increased over the past six months. This is due to high inflation, rising interest rates, the war in Ukraine and the worsening economic outlook. If interest rates rise further and incomes lag behind price increases, people, businesses and governments with high debts could run into difficulties. After all, there is a risk they will be unable to repay their loans. We therefore call on banks to be prepared for higher losses. Fortunately, Dutch financial institutions have buffers to absorb potential losses.
What is a stable financial system?
A stable financial system continues to function during economic slowdowns, if banks or pension funds run into trouble, or if stock markets crash. In other words, it is a robust and resilient system that can absorb shocks and contribute to sustainable economic growth in the Netherlands. We cannot allow the financial system itself to become a source of disruption in the economy. A stable financial system also guarantees sufficient financial buffers.
How does DNB know if the financial system is stable?
We look at various areas to assess the stability of the financial system. To do this, we use a large number of indicators, such as an increasing amount of loans (credit growth), rapidly rising real estate prices and the amount of cash that banks are holding (liquidity). For example, strong credit growth associated with strongly rising real estate prices is often an indication of (future) instability.
Financial stability and cooperation
We chair the Financial Stability Committee, which meets at least twice a year. At international level we participate in the International Monetary Fund (IMF), the European Central Bank (ECB), the European Systemic Risk Board (ESRB) and the Financial Stability Board (FSB). Our President Klaas Knot is the Vice-Chair of the FSB. Our participation in consultations in The Hague and Brussels is also important.
Climate and energy transition risks
Insurers and pension funds
The equity portfolios of Dutch pension funds and insurers have become significantly “greener” over the 2017-2020 period. This is mainly because investee companies have emitted less carbon over that period, according to an analysis by De Nederlandsche Bank (DNB).Read more
Trust in DNB benefits from greater awareness of the financial supervisor's tasks and responsibilities
On average, the Dutch public has fairly high trust in De Nederlandsche Bank (DNB) as the supervisory authority for financial institutions. DNB's execution of the Dutch Deposit Guarantee, which insures account holders' balances up to €100,000, contributes greatly to this level of trust.Read more