On 17 March 2020, the Dutch Central Bank (De Nederlandsche Bank, DNB) issued a press release stating that it has discussed the consequences of the coronavirus outbreak for the Dutch economy and the financial sector with the Netherlands Authority for the Financial Markets (Autoriteit Financiële Markten), the Dutch Banking Association, the Federation of Dutch Pension Funds and the Dutch Association of Insurers.
DNB notes that given the major impact of the coronavirus outbreak on the Dutch economy and the financial sector, and with the aim to limit the economic damage as much as possible, it is crucial that the financial sector continues to function properly. In close cooperation with the aforementioned parties, DNB is doing its utmost best to safeguard the stability of the financial sector, in order to prevent lending to the business sector from being jeopardised and to ensure the payment system continues to function properly. The Dutch banking has built up significant additional buffers thanks to the tightened capital and liquidity requirements set by DNB in response to the financial crisis, which has strengthened their resilience and will enable them to better withstand the impact of the coronavirus outbreak;
According to DNB, the strong starting position of the Dutch banking sector allows DNB to temporarily give banks additional leeway to continue business lending and absorb potential losses. In view of current developments, DNB considers this a prudent approach and has decided to take the following measures:
- the systemic risk buffer will be lowered, from its current 3% of global risk-weighted exposures to 2.5% for ING, 2% for Rabobank and 1.5% for ABN Amro; and
- the introduction of a floor for mortgage loan risk weighting will be postponed.
These measures will free up EUR 8 billion in capital, enabling the banks to continue lending to the real economy in the face of rising losses. DNB emphasises that seeing that the total impact on lending could rise to a maximum of EUR 200 billion, it is paramount that banks use this freed-up capital to support lending, and not to pay dividend or share repurchases. DNB indicates that these measures will remain in force as long as necessary. Once the situation is back to normal, DNB will compensate the systemic risk buffer reduction by gradually increasing the countercyclical capital buffer to 2% of Dutch risk-weighted exposures.
Finally, DNB notes that pension funds and insurers are also affected by the coronavirus outbreak. DNB is considering measures to limit the impact on these sectors as well, e.g. by postponing planned regulatory adjustments.