Monitoring financial soundness
We check that all 1,400 institutions comply with the law. We refer to this as “integrity supervision”. We also monitor the financial soundness of many institutions. Several times a year, they submit reports to us that contain key data, including their financial position. Our supervisors check that they have enough cash available. We also verify that they have reserves for a rainy day, which they need to meet their obligations. For example, so that your insurer can pay out your insurance claim. We look beyond mere profits and annual turnover. Other aspects are also important. For example, an insurance firm’s business model and a pension fund's investment policy.
Risks for financial institutions
It is also important that financial institutions do not take too much risk. They need to be and remain safe and robust. We expect them to have responsible risk management and pay close attention to the risks to which they are exposed, such as:
- Credit risk: if firms cannot repay their bank loans, banks incur losses. This affects their profitability and could even lead to capital losses.
- Liquidity risk: if banks find it more difficult to obtain funding, prices skyrocket. If customers withdraw deposits, banks can also get into liquidity problems. This may lead to liquidity shortages.
- Integrity risks: criminals could launder money through financial institutions. This will result in financial and reputational damage.
- Climate-related risks: risks related to climate change and the energy transition can pose a financial risk.
If we notice anything special we contact the institution in question. Our supervisors meet with the institutions several times a year to discuss current developments.
If problems should emerge, the customers’ interests always come first
Our supervision reduces the risk of an institution running into difficulties. But there are no guarantees. If something goes wrong, we stand ready to intervene in such a way as to minimise losses. If a large bank or insurance firm collapses, we want to ensure that its problems do not spill over to other financial institutions and that the government does not need to step in to save the firm with taxpayers’ money. If a bank goes bankrupt, we activate the deposit guarantee scheme. This means that, as an account holder, you will get your money back, up to EUR 100,000.
Supervision in tandem with the AFM and the ECB
As part of our supervision, we work closely with other supervisory authorities. In tandem with the AFM we supervise licensed financial institutions in the Netherlands. In addition, jointly with the AFM and the Central Bank of Curaçao and Sint Maarten, we supervise financial institutions in Bonaire, Sint Eustatius and Saba. While we focus primarily on an institution's financial soundness, the AFM looks at its market conduct.
The European Central Bank (ECB) supervises all large banks in Europe. Examples in the Netherlands include ING, ABN AMRO and Rabobank. We are actively involved in conducting this European supervision, as are the national supervisory authorities of the other euro area countries.