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Amendment to prudential requirements for proprietary traders

DNB amends the prudential regime for proprietary traders it considers "local firms" under the Capital Requirements Regulation (CRR). The decision was prompted by a Breach of Union Law investigation initiated by the European Banking Authority (EBA) into the compatibility of DNB’s interpretation of this term with Union law.

Published: 28 February 2024

In its Breach of Union Law procedure, the EBA launched an investigation into the Dutch supervisory regime governing proprietary traders. The EBA, advocating a strict interpretation and application of the CRR, takes the view that DNB’s interpretation of the term "local firm" is too broad.

Based on its interpretation of the term "local firm", DNB has since 2014 imposed capital requirements on proprietary traders that are in line with their risk exposure. DNB believes that its prudential requirements for these institutions are sound and proportionate.

DNB nonetheless had its interpretation of the term "local firm" thoroughly analysed, both internally and externally, and has come to the conclusion that its interpretation is legally untenable. It has therefore decided to discontinue the current national prudential regime for local firms, taking immediate action to apply the CRR to the investment firms involved. DNB has notified the EBA of this policy change.

The relevant firms will have until 31 March 2018 to meet the applicable requirements under the CRR. If a firm’s capital falls short, it must draw up a restoration plan to ensure that it meets the CRR capital requirements as soon as reasonably practicable but in any event by 31 December 2019 at the latest. The same applies to firms that have submitted an application for a licence for "proprietary trading" as an investment activity.

The Dutch proprietary trading regime currently applies to thirteen investment firms operating in the Netherlands. DNB has informed the firms affected by the amended prudential regime by letter, a copy of which is attached as a download to this factsheet.

On 6 December 2017 the European Banking Authority (EBA) published the following press release on his website:

EBA closes breach of Union law investigation against DNB and will monitor transitional measures adopted to redress the case – 06 December 2017