On 13 January 2021, the Dutch Authority for the Financial Markets (Autoriteit Financiële Markten, the AFM) published its supervision agenda for 2022 (the AFM Agenda 2022). The AFM Agenda 2022 follows on and links specific actions and priorities to trends and risks listed in the AFM’s Trend Monitor 2022 (Trendzicht 2022), the AFM’s annual analysis of trends and developments in the financial markets, which was published on 4 November 2021.

Section 1 of the AFM Agenda 2022 describes the key developments affecting the AFM’s strategy and supervision agenda (which are addressed in more detail in the AFM’s Trend Monitor 2022). These include, among others:

• The macroeconomic climate: the AFM refers to the optimistic sentiment in the financial markets, but also mentions the recently rising inflation outlook. The AFM also points out the increase of the number of retail investors and business taking on debt as a result of low interest rates, the financial markets becoming more vulnerable to over valuation and sudden market shocks, and the effects of low interest rates on the profitability and solidity of financial institutions (primarily insurers).
• Digitalisation: the AFM recognises that data, which is increasingly at the heart of business processes, are an important tool for improving services and profitability. However, the increase in use of data also carries risks, such as the inability to ensure high data quality and the legitimate/careful processing of personal data. In addition, protection against cyber attacks continue to require attention. According to the AFM, the trend of outsourcing digital business processes has resulted in financial institutions becoming more vulnerable to disruptions at their service providers. In addition, the AFM notes the further rise of big techs, bringing about convenience as well as risks (including for example concentration risks where financial institutions become dependent on a few big techs for cloud services). Finally, the AFM mentions the increase in crypto investments, the risks associated with these products and the upcoming European regulation (the Regulation on markets in crypto-assets) that is being prepared.
• Internationalisation: there are several important European legislative processes planned for 2022, for which the AFM will contribute input through ESMA and other channels. In addition, the AFM notes that supervisory convergence as a next step in European cooperation is increasingly influencing its activities. Given the fact that digitalisation is allowing market parties to operate in different Member States at the same time and markets are increasingly moving across borders, supervisory convergence is becoming a more pressing issue. The AFM also mentions that financial institutions, primarily those operating in the capital markets (proprietary traders, investment fund managers, trading platforms), have moved to the Netherlands as a result of Brexit, making the Netherlands one of the main European centres for trading in equities.
• Sustainability: according to the AFM, climate targets will largely determine the social agenda for decades to come. Efforts to reduce the CO2 intensity of the Dutch economy could lead to stranded assets and have negative effects on prosperity, something which the financial sector will need to take into account for their assets and funding models. The AFM notes that financial institutions play an important role in the sustainability transition, including by mobilising capital for sustainable investments and making decisions based on aspects of sustainability in companies’ business operations (something which creates potential conflicts of interest). The AFM notes that financial institutions are increasingly being looked at for their role in the sustainability transition. Certain financial institutions are currently required to provide transparency regarding their sustainability goals, but relevant legislation and regulations have not yet been crystallised. Even though sustainability definitions and reporting standards are still being developed, new capital rapidly flows into sustainable investments, which brings about the risk of greenwashing.
• Integrity: the AFM notes that money laundering and other financial criminality erode the integrity of the financial and economic system. To maintain confidence in the financial sector, it should be avoided that financial institutions are involved in malicious practices and it is important that these institutions are fulfill their role as gatekeepers.

Section 2 describes the AFM’s strategy for 2022. The AFM revised its strategy in 2019 for the period 2020 – 2022, which means that this is the third and final year of the AFM’s revised strategy. In summary, the AFM’s supervisory approach remains proactive, data-driven and influential, focusing on four supervisory areas: financial services, capital markets, asset management and audit.

Section 3 of the AFM Agenda 2022 sets out the AFM’s priorities and key activities in 2022, covering a total of six topics:

1. Transition to a sustainable society: sustainability aspects need to be integrated into financial products and services in a responsible and diligent manner. Consumers and investors must be able to trust that financial products and services that are promised to be sustainable are in fact sustainable.
2. Transition to new pensions system: the new pensions legislation is expected to come into effect in 2023. The AFM will be supervising clear communication with realistic expectations with regard to scheme members.
3. Protection of retail investors: low interest rates have boosted retail investing. The AFM’s objective is to provide reasonable protection for investors against taking excessive risks.
4. Continued development of duty of care: re-evaluation of the duty of care is necessary in light of changes to social and statutory standards.
5. Preventing market abuse: in its supervision of market abuse in the capital market, the AFM will focus on improved quality of the Suspicious Transaction and Order Reports (STORs), which relay suspicions of market abuse.
6. Expanding supervision of audit firms: the AFM will will considerable attention to expanding its supervision of audit firms.

These six key topics are elaborated upon in terms of the four supervisory areas of financial services, capital markets, asset management and audits. Each supervisory area is linked to a number key priorities and for each priority the AFM lists a number of key activities.

1. Supervision of financial services: the AFM aims to achieve the following in 2022 in the supervision of financial services:

• preparing the pensions sector for the transition to the new pensions system, with a focus on scheme members’ interests;
• adapting or banning harmful investment products and services;
• providing investors with reasonable protection against taking irresponsible risks (customers’ interests must be a top priority in the design of online decision-making environments);
• ensuring that products and sales decision and advisory processes are clear and customer-focused in a digital environment; and
• ensuring responsible lending to households.

2. Supervision of the capital markets: the AFM aims to achieve the following in 2022 in the supervision of the capital markets

• ensuring that capital markets are prepared for compliance with sustainability regulations (e.g. in the area of CO2 emissions derivatives trading, the EU climate benchmarks and ESG benchmarks);
• increasing data quality and information quality, specifically for MiFID II/MiFIR transaction data and STORs; and
• ensuring that capital market parties will be able to manage the effects of digitalisation.

3. Supervision of asset management: the AFM aims to achieve the following in 2022 in the supervision of asset management:

• ensuring that the asset management sector will be transparent about the sustainability features and sustainability goals of its financial products;
• ensuring that the asset management sector will integrate risks in connection with the sustainability transition into (the risk management of) its business operations; and
• ensuring that the asset management sector will adequately manage liquidity risks.

4. Supervision of audit firms and financial reporting: the AFM aims to achieve the following in 2022 in the supervision of audit firms and financial reporting:

• achieving better connectivity between non-financial and financial reporting;
• gaining better insight into the risks of non-PIE audit firms in order to stimulate the quality assurance of the statutory audits they perform;
• ensuring that permanent quality of statutory audits at PIE audit firms are demonstrable.

Besides these four supervision areas, the AFM also in detail addresses its priorities and key activities in relation to three ‘AFM-wide issues’, namely sustainability, combating money laundering and other financial-economic criminality, and professional organisation.

1. Sustainability: the AFM will step up its efforts in the field of sustainability in 2022 with the following key activities:

• in 2022, the AFM will continue to assist the financial sector in implementing the new legislation and regulations in order to achieve (greater) transparency on the degree of sustainability of investments;
• reviewing compliance with the Sustainable Finance Disclosure Regulation (SFDR); and
• contributing to the development of sustainability reporting, especially the Corporate Sustainability Reporting Directive (CSRD).

2. Combating money laundering and other financial-economic criminality: the AFM’s key activities in this important focus area will be:

• supervising compliance with relevant rules and regulations by way of requesting information from financial institutions and drawing up risk models;
• carrying out reviews aimed at combating and preventing breaches of regulations to prevent money laundering and financing of terrorism and, where necessary, take enforcement action;
• prioritising international cooperation on combating money laundering and the financing of terrorism. The AFM actively takes part in international collaborations such as the Anti Money Laundering Centre. The AFM is also involved, in consultation with the Ministry of Finance, in the development of new European regulations, such as amendments to the EU directives and the proposed establishment of a European anti money laundering authority; and
• strengthening cooperation with national partners such as the Dutch Central Bank (De Nederlandsche Bank), the national police, the Public Prosecution Service, the Fiscal Intelligence and Investigation Service and the Tax & Customers Administration.

3. Professional organisation: the AFM will focus on revising and improving its supervision, among other things by positioning the AFM as an attractive employer, developing into a data-driven supervisor and developing a new rewards and recognition system for employees.

Sections 4 and 5 of the AFM Agenda 2022 respectively contain information on the AFM’s finances in 2022 and the external key performance indicators used by the AFM.

The AFM will be renewing its strategy for the period up until 2026 later this year.