Financial Regulatory Forum

Dutch government tells banks: don’t count on state

By Reuters Staff
July 10, 2009

    By Ben Berkowitz

    AMSTERDAM, July 10 (Reuters) – The Dutch government wants banks to jointly guarantee customer savings, it said in a report on Friday, as it warned the sector not to rely on state aid or the hope that such aid will be available in the future.  In a more prudent future, banks would offer a narrower range of services and be more tightly regulated, according to the report.
   “We do not want to see anymore that the financial market will take such risks,” Finance Minister Wouter Bos told reporters after the last weekly Cabinet meeting before the government’s summer recess.
   The report is one of the government’s biggest policy statements for the sector since its extensive intervention in the banking system last October.
   On Oct. 3, amid a growing crisis of investor confidence and a lack of liquidity, the state nationalised the Dutch portions of Fortis in a 16.8 billion euro deal. 
   That deal included Fortis’s interests in ABN AMRO, the one-time Dutch market leader that had been acquired by a three-bank consortium just a year prior.
   On Oct. 20 the government pumped 10 billion euros into ING as its share price plunged. It later provided billions more in support to bancassurers SNS Reaal and Aegon. It has also set up temporary guarantees for customer deposits, a system it now wants the banks to shoulder via a common fund tied to their levels of risk-taking.
   The Finance Ministry report follows one issued earlier in the day by the Dutch central bank (DNB) on the broader future of the nation’s financial system.
   The DNB said Dutch insurers and asset managers face challenges as they are currently structured, while pension funds would benefit from expanding, if possible.
   The report also highlighted concerns about competition for Dutch retail and corporate banks and raised questions about the success of the bancassurance model, which is widespread in the Netherlands.
   “With hindsight, analysis suggests that cost synergies were only partially realized, as banks and insurers continued to operate for the most part as separate companies, corporate cultures proved different, and the crisis demonstrated that risk diversification does not hold in times of distress,” it said.

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