An extract from The Banking Regulation Review, 11th Edition


The Netherlands has a long history as an open trading nation with household-name institutions such as ING Bank, cooperatively owned Rabobank and ABN AMRO operating worldwide. The Dutch banking sector is highly concentrated, with this same small group of systemically important banks accounting for the bulk of domestic lending to households and businesses. The lion's share of Dutch savings is held in accounts with these banks, which also handle most payment processing. Measured against the size of the Dutch economy, the banking sector is large. Although on a downward trend since pre-crisis years, in 2019, the size of its assets relative to the gross domestic product of the Netherlands still amounted to over 320 per cent.

Dutch banks reported lower results in 2019 than in the previous year. Banks continued to profit from a strong economy, a booming housing market and from the cost-cutting and digitisation efforts of earlier years. However, banks were also faced with continued pressure from low interest rates, increased provisions for bad loans and high regulatory and compliance costs. Other risks to the business models and operations of Dutch banks include political uncertainty, technological disruption and cybercrime.

The regulatory regime applicable to banks

i Basic structure of banking regulation

The Netherlands has a twin peaks supervision model, which focuses on system and prudential supervision on the one hand, and conduct of business supervision on the other. The European Central Bank (ECB) and the Dutch Central Bank (DCB) are the system and prudential supervisors. The responsibility for conduct of business supervision lies with the Netherlands Authority for the Financial Markets (AFM), the aim being to foster orderly and transparent market processes, maintain integrity in the relationship between market parties and overseeing due care in the provision of services to customers.

The regulatory rules applicable to banks are largely laid down in the Dutch Financial Markets Supervision Act (FMSA), which has been in force since 2007, and in the various decrees and regulations deriving from it. In view of the increasing complexity of the FMSA and difficulties in its compatibility with the sectoral approach of European legislation, preparations were started in 2016 for a thorough review of the design of the FMSA. However, in May 2019, the Minister of Finance decided that, in view of the complexity of such an exercise, the costs involved and the expected developments in the area, it was not the right time to revise the FMSA.

The regulatory rules applicable to banks derive from EU legislation to a very large extent. Many of the rules contained in the FMSA follow the implementation of European directives. However, with the aim of further integrating the single market, more and more regulatory requirements are adopted in the form of European regulations. Of particular importance for the banking sector are the Capital Requirements Directive (CRD IV), as implemented in the FMSA, and the Capital Requirements Regulation (CRR). Both CRD IV and CRR were significantly amended in 2019 by the EU's Banking Reform Package, resulting in CRD V and CRR II. The changes will largely take effect in December 2020 and June 2021. The Dutch act implementing CRD IV and CRR II was published for consultation in February 2020.

ii Regulation of banks with a registered office in the Netherlands

Banks established in the Netherlands are required to obtain a banking licence from the ECB. The DCB is responsible for the processing of licence applications. To obtain a banking licence, banks must, inter alia, comply with the following requirements:

  1. the day-to-day policymakers of a bank and its management team members must be suitable for the banking business; in addition, the members of the supervisory board (or comparable body) should also be suitable for the performance of their supervisory tasks;
  2. the integrity of the persons determining or co-determining the day-to-day policy, the management team members and the members of the supervisory board (or comparable body) of the bank must be beyond doubt;
  3. the bank must have sound and prudent business operations, including procedures and measures for adequate risk management and client acceptance;
  4. at least two natural persons should determine the day-to-day policy of the bank and perform their activities from within the Netherlands;
  5. the supervisory board (or comparable body) should consist of at least three persons;
  6. the bank must have a transparent control structure safeguarding adequate supervision; and
  7. the bank must comply with certain financial safeguards, such as minimum own funds, solvency and liquidity requirements.

Once a licence has been granted, a bank must continue to comply with these requirements. Dispensation may be granted from certain specific requirements for obtaining a banking licence provided the applicant demonstrates that he or she cannot reasonably comply with the requirements, and that the objectives the requirements seek to protect can be achieved through alternative means. To stimulate innovation in the financial sector, the DCB, since 2017, is also open, where appropriate, to more tailor-made solutions for innovative products, services or business models through its regulatory sandbox.

In January 2019, the formal application period for a banking licence was changed from 13 weeks to 26 weeks. This allows the DCB and the ECB to rely less on stop-the-clock information requests, and will give applicants a more realistic view of the required decision-making time. Other recent changes to the application process include the obligation to prepare an exit plan, which should identify how the applicant could cease its banking operations in an orderly manner when so required. In March 2018, the ECB published two guides detailing the process and requirements for acquiring a banking licence in the eurozone. In January 2019, these guides were supplemented with more specific expectations regarding capital requirements and the programme of operations.

If a bank wishes to render investment services or perform investment activities in the Netherlands, it must apply for a wider banking and investment firm licence. In this case, there are additional requirements that relate to the conduct of business requirements with which investment firms need to comply. A licensed bank does not need a separate licence for the provision of payment services or certain other financial services also regulated under the FMSA, such as the offering of (consumer) credit, providing advice about financial products (other than financial instruments) and acting as an intermediary with respect to such products. The services involved, however, need to be covered by the banking licence, and the bank involved is subject to additional conduct of business rules when offering such services (see Section IV).

Since 2016, the FMSA has contained a separate regime for credit unions, defined as cooperatives of members sharing a certain profession or business that take repayable funds from their members and grant credits for their own account to their members for the purposes of their profession or business.

iii Regulation of foreign banks and activities

In general, branches of foreign banks established to carry out regulated banking activities in the Netherlands are subject to the same licence requirements and ongoing obligations as banks with a registered office in the Netherlands. This means that these branches usually require a banking licence. However, foreign banks with their registered office in another EU or European Economic Area (EEA) Member State may conduct banking activities through a branch office or on a cross-border basis in the Netherlands using a European passport. On this basis, banks from other eurozone countries may conduct banking activities in the Netherlands under their ECB banking licence, provided the ECB has been notified thereof. Similarly, banks with their registered office in an EU or EEA Member State that is not a eurozone country may conduct banking activities in the Netherlands under their home Member State banking licence following a notification procedure in their home Member State. Those non-eurozone banks holding a European passport in the Netherlands are directly supervised by the ECB. The DCB remains responsible for the supervision of non-EEA banks that have established a branch or provide cross-border services in the Netherlands.