Global menu

Our global pages

Close

Coronavirus - Overview of measures in the financial sector by Dutch Regulators due to the Corona pandemic

  • Netherlands
  • Coronavirus
  • Financial institutions

23-04-2020

DNB (the Dutch Central Bank)

Banks: Micro prudential, less significant institutions (LSIs)

- Banks can use their capital and liquidity buffer. Therefore, banks will be allowed to temporarily operate below the level of capital as defined by the Pillar 2 Guidance (P2G) and the capital conservation buffer (CCB). This is in line with actions taken by the ECB.

- Banks can use their liquidity buffer, even if it means they will operate below the liquidity coverage ratio (LCR). This is in line with actions taken by the ECB.

- Banks can partially meet the Pillar 2 requirements with capital instruments that do not qualify as Common Equity Tier 1 (CET1) capital. The P2R does no longer need to be composed entirely out of CET1 capital, but can be a reflection of the minimal capital composition under Pillar 1 requirements, being at least 56.25% CET1, 18.75% Additional Tier 1 instruments (AT1) and 25% Tier 2 instruments. This change in capital composition was already scheduled to come into effect in January 2021, in line with the revised approach under the Capital Requirements Directive (CRD V), but is being brought forward. However, DNB can still request banks to hold a different P2R composition, depending on bank-specific circumstances. This action is in line with measures taken by the ECB.

- On a case-by-case basis DNB may allow some temporary relaxation on imposed limits on asset encumbrance, which are part of Pillar 2 supervisory requirements. For the asset encumbrance to be relaxed, a well substantiation by the institution is required.

- As operational actions, some data requests have been postponed and banks are granted a longer period of time to deliver certain reports. Banks have been individually informed of this by letter.

- DNB may also consider to provide operational relief to banks on a case-by-case basis. Depending on individual circumstances, DNB may therefore adjust prudential timetables, processes and deadlines. However, DNB will continue with essential data requests to monitor current developments, such as the daily liquidity monitoring requests or any mandatory data that DNB has to request by law.

 

Banks: Macro prudential, all banks

- The systemic buffers will be lowered for the three major banks. The current 3% global risk-weighted exposures will be lowered to 2.5% for ING, 2% for Rabobank and 1.5% for ABN Amro.

- The introduction of a floor for mortgage loan risk weighting will be postponed.

- The ECB asks banks to not pay dividends until at least 1 October 2020 or to buy bank shares. DNB strongly supports this recommendation and therefore considers it applicable to LSIs that are supervised by DNB.

 

Insurance companies

- DNB has risk-based postponed or canceled a number of supervisory investigations.

- Based on the EIOPA recommendations on supervisory flexibility regarding the deadline of supervisory reporting and public disclosure, DNB postponed reporting terms for Solvency II and basic insurers. Individual insurers have been informed of this by letter.

- EIOPA urges insurers to temporarily postpone all discretionary dividend distributions and share buy backs. DNB strongly supports this recommendation.

- By virtue of their duty of care, health insurers offer hospitals and other care providers financial support during the corona pandemic. Advanced finances lead to a temporary increase in capital requirements for health insurers and a decrease in solvency, under the regulatory framework of Solvency II. DNB has clarified that the available financial buffers exceeding the legally required capital requirement (SCR) can be used in this corona pandemic. In case the solvency of a health insurers falls below their own internal target standard, DNB takes the temporary duration of this exceptional situation into account. Therefore, DNB will not require immediate remedial actions based on the insurer’s own capital policy, provided that this decrease below the target standard is the result of temporary additional advance payment and that there is no threat of falling below the SCR.

 

Pension funds

- DNB has risk-based postponed or canceled a number of supervisory investigations for the coming quarter.

- DNB prioritizes its supervisory activities and shifts its attention to certain risks, such as increased concentration to the functioning of business continuity management, cyber risks and implications caused by the current turmoil on the financial markets (impact on the funding ratio, issues related to the implementation of the rebalancing policy and liquidity management).

- DNB will temporarily publish the nominal interest rate term structure (zero coupon) including ultimate forward rate (UFR) on a weekly basis.

- Under normal circumstances, DNB expects pension funds to adhere to investment policy. However, considering the exceptional market conditions there are legitimate reasons for pension funds to temporarily diverge from their strategic investment policies. When necessary, a solid decision making process and extra attention for risk management is required.

- DNB gives an additional three months, until 30 September, for reporting all annual statements. DNB will also deal favorably with requests for postponement of monthly and quarterly reports and recovery plans.

 

Asset managers

- No special measures are taken in relation to asset managers. However, DNB urges asset managers to contact DNB or AFM as soon as possible when developments occur which could lead to prudential shortages on a short term basis. Asset managers should not wait until formal supervisory reports should be submitted.

- DNB urges asset managers to take into account the current situation, prospects and any other scenarios that could affect profitability and financial buffers in a dividend distribution and to reconsider the strict need for dividend distribution with shareholders.

 

The Dutch Authority for the Financial Markets (AFM)

Supervised institutions

- The AFM has postponed large data requests for financial companies until 1 June 2020. Investigations on interest-only mortgages, compliance with the Money Laundering Prevention Act and the Market Monitor for Advisors and Intermediary are exempted from this action, but the AFM will also take the current circumstances into account during these investigations.

- The AFM has decided to suspend the market monitor for the Caribbean Netherlands until the 1st of June 2020.

 

Issuing institutions

- Issuers are required to publish the financial reporting of the previous year and file it with the AFM by 30 April at the latest. The AFM decided, following ESMA’s statement, to conduct an accommodating policy for companies who are unable to publish their financial reporting and to file it simultaneously with the AFM. Companies who cannot meet the deadline are expected to report this to the AFM in time. The AFM emphasized that the provisions of the Market Abuse Directive remain fully applicable. Following these provisions, listed companies are required to keep their investors informed of any delay.

 

Contributors to interest rate benchmarks

- Contributors to interest rate benchmarks are required to have an audit conducted by a third party within six months of the publication of the Code of Conduct applicable to that benchmark. In line with the actions of ESMA the AFM will grant contributors to interest rate benchmarks leniency if contributors have the audit performed before 30 September 2020, even if the 6-month period will expire before this date. The AFM expect contributors of interest rate benchmarks to contact the AFM if such an occasion occurs.

 

Investment fund managers

- Investment fund managers are required to publish annual reports within the deadlines set in European regulations regarding AIFs, UCITS, EuVECAs and EuSEFs and, in the case of UCITS, semi-annual reports on each fund that is managed. ESMA proposes in its statement that national supervisors should apply deadlines less strictly. AFM applies this leniency requested by ESMA.

 

Investment firms

- ESMA encourages national authorities to not prioritize supervisory action against investment firms regarding the deadlines of the general best execution reports. The AFM follows the guidelines of ESMA which states that if investment firms are unable to publish RTS 27 reports due by 31 March 2020, they may only be able to publish them as soon as reasonably practicable after that date and no later than by the following reporting deadline, i.e. 30 June 2020. Firms may only be able to publish the RTS 28 reports due by 30 April 2020 on or before 30 June 2020. Therefore, the AFM will not take supervisory action against investment firms who are not able to meet the official reporting deadlines, but the AFM will maintain the ESMA deadlines.

 

Entities subject to Securities Finance Transactions (SFT)

- ESMA published recommendations regarding the postponement of the reporting obligation for securities financing transactions (SFT) regarding backloading. Therefore, the AFM will not focus its supervision on SFTs that fall under the backloading obligation of Article 4 (1). The AFM requests reporting agents to focus all their efforts on the correct reporting of new transactions from 13 July for phase 1- and 2- parties or later for phase 3- and 4- parties. This obligation would become applicable as of 13 April 2020, but has now been postponed with three months to 13 July 2020.

 

Asset managers

- The AFM is in close contact with the asset management sector regarding the consequences of the impact of the corona crisis on the sector and special attention is paid to liquidity in the market, the net inflow of funds and other consequences of Covid-19. The AFM ensures that managers of investment institutions and UCITS immediately inform the AFM and investors if they use specific instruments to promote liquidity, suspend the repurchase or redemption of units or if they postpone the determination of the net asset value. Information about this should be fair, clear and not misleading.

For more information contact

< Go back

Print Friendly and PDF
Subscribe to e-briefings