Featured Product

    IMF Publishes Reports on 2019 Article IV Consultation with Netherlands

    February 12, 2019

    IMF published its staff report and selected issues report under the 2019 Article IV consultation with the Kingdom of the Netherlands. Directors recommended further tightening of macro-prudential policies, including loan-to value and debt-service-to-income ratios. They noted that banking sector soundness and profitability have improved, although banks remain highly leveraged, concentrated, and vulnerable to shocks; thus, they encouraged the authorities to continue to build buffers and further strengthen supervision.

    The staff report highlights that bank credit to non-financial corporations contracted by about 1% y-o-y in November 2018. Non-banks, mainly insurance companies and pension funds, increased their mortgage lending recently, but from relatively low levels. Banks capitalization improved and non-performing loans (NPLs) are among the lowest in the euro area. Banks are increasingly focusing their lending activity on the domestic market, with mortgage loans representing about 90% of long-term lending. In addition, banks are still highly dependent on wholesale funding, with an aggregate loan-to-deposit ratio above 120%, compared to below 100 for the euro area. Short-term market funding represents about 28% of total. This makes banks vulnerable to changes in global financial conditions.

    The report highlights that continued building of capital and liquidity buffers to comply with tightening requirements and reinforce resilience to shocks is warranted. The 2018 EBA stress test indicates that large banks are well-capitalized but one bank falls below the 3% leverage ratio (capital-to-assets) limit in the adverse scenario. In addition, the leverage ratio is below the euro area average for significant institutions and should be strengthened. Furthermore, the report reveals that, as macro-prudential policies were tightened recently, household debt has stabilized at about 250% of the net disposable income, but it still remains high. Over-borrowing on mortgages has contributed to the accumulation of household debt. When housing prices declined sharply after the global financial crisis, many mortgages were under water and private consumption contracted sharply, as households attempted to rebuild their net worth.

    The report also notes that insurance sector solvency has improved but insurers remain vulnerable in the current low interest rate environment. Low interest rates are associated with higher liabilities for insurers, especially for life insurance where 67% of liabilities consist of guaranteed return policies. The new national recovery and resolution framework for insurance companies is a welcome development. Such a framework, which is intended to protect policy holders and safeguard financial stability, will facilitate orderly resolution of insurance companies in the event of a disruptive shock.

     

    Related Links

    Keywords: Europe, Netherlands, Banking, Insurance, Macro-Prudential Policy, NPLs, Recovery and Resolution Framework, Article IV, IMF

    Featured Experts
    Related Articles
    News

    EC Delegated Regulation on Specialized Lending Exposures Under CRR

    EC finalized the Delegated Regulation 2021/598 that supplements the Capital Requirements Regulation (CRR or 575/2013) and lays out the regulatory technical standards for assigning risk-weights to specialized lending exposures.

    April 14, 2021 WebPage Regulatory News
    News

    OSFI Consults on Minimum Qualifying Rate for Uninsured Mortgages

    OSFI is proposing new minimum qualifying rate for uninsured mortgages under the Guideline B-20.

    April 13, 2021 WebPage Regulatory News
    News

    OSFI Issues Letter on ICAAP Submission and Internal Audit of BCAR

    OSFI issued a letter to confirm that a formal Internal Capital Adequacy Assessment Process (ICAAP) submission is not required in 2021.

    April 12, 2021 WebPage Regulatory News
    News

    ECB Updates List of Supervised Entities in EU in April 2021

    ECB updated the list of supervised entities in EU, with the number of significant supervised entities amounting to 115 as of the March 01, 2021 cut-off date.

    April 12, 2021 WebPage Regulatory News
    News

    ESMA Issues Notification Templates for STS Synthetic Securitizations

    ESMA published the interim simple, transparent, and standardized (STS) notification templates for synthetic securitizations, post the recent amendments to the Securitization Regulation.

    April 09, 2021 WebPage Regulatory News
    News

    EC Agrees to Prolong Scheme to Support NPL Reduction at Greek Banks

    EC has approved the prolongation of an existing Greek scheme aiming to support the reduction of nonperforming loans, or NPLs, of Greek banks on the basis that it remains free of any State aid.

    April 09, 2021 WebPage Regulatory News
    News

    EIOPA Study Examines Internal Model Market and Credit Risks Under SII

    EIOPA published a report presenting the results of its yearly study on the internal modeling of market and credit risks under the Solvency II Directive, also known as SII.

    April 09, 2021 WebPage Regulatory News
    News

    EBA Issues Erratum for Phase 2 Package of Reporting Framework 3.0

    EBA published an erratum for the technical package on phase 2 of the reporting framework 3.0.

    April 08, 2021 WebPage Regulatory News
    News

    EBA Updates Lists of Entities for Use in Capital Calculations under SA

    EBA published an erratum for the technical package on phase 2 of the reporting framework 3.0.

    April 08, 2021 WebPage Regulatory News
    News

    FED Proposes to Automate Bank Stock Adjustment Using Call Report Data

    FED published a proposal to automate non-merger-related adjustments to member banks' subscriptions to Federal Reserve Bank capital stock.

    April 08, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6835