Country Reports

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2024

June 18, 2024

Kingdom of the Netherlands-The Netherlands: Financial Sector Assessment Program- Technical Note on Climate Risk Analysis

Description: The Netherlands is exposed to both physical and transition risks from climate change. Due to unique geographic factors, about 60 percent of the land surface in the Netherlands is vulnerable to flooding from the sea and the large rivers, with nearly 26 percent of the land surface below sea level. Also, the Netherlands has high levels of nitrogen depositions from agriculture and transportation, exceeding the critical value set by EU Directives.

June 18, 2024

Kingdom of the Netherlands-The Netherlands: Financial Sector Assessment Program- Technical Note on Systemic Risk Analysis

Description: The Netherlands has a large financial system. The system’s assets are roughly eight times the Gross Domestic Product (GDP) of the Netherlands. Banks account for about one third of the financial system and 253 percent of GDP as of 2023Q2. Occupational pension funds are among the largest globally, at 142 percent of GDP. The insurance sector, in particular life insurance, has been undergoing consolidation, and stands at about 43 percent of GDP. Other financial institutions have grown significantly to surpass banks in size, reflecting responses to Brexit and financial innovation. The Dutch financial system is deeply interconnected domestically and with the rest of the world.

June 18, 2024

Kingdom of the Netherlands-The Netherlands: Financial Sector Assessment Program- Technical Note on Banking Supervision

Description: Supervision of less significant institutions (LSIs) is effective in the Netherlands. The De Nederlandsche Bank’s (DNB) supervisory approach to LSI supervision is intrusive and transparent. It builds on well-developed supervisory tools which support strategically focused, ongoing supervisory dialogue with banks. The supervisory framework blends the robust SSM/EU framework with Dutch elements, enriching the spectrum of supervisory techniques and tools. The LSI supervisory capacity is founded in a solid knowledge base of a broader DNB and it is used to cover critical topics, which include, (i) comprehensive and thorough assessments of risk managements’ outcomes, (ii) deep dives into governance, behavior and culture and (iii) the development of the nature risk agenda. DNB and the Autoriteit Financiële Markten (AFM), a conduct supervisor, cooperate very closely while complementing prudential and conduct supervision, to tackle central issues, including Interest-Only (IO) Mortgages. DNB’s LSI supervision also factors-in macroprudential deliverables. Furthermore, the supervisory process relies on strong enforcement and thorough licensing processes, on side of DNB. A vigorous governance of DNB’s LSI supervision includes 2nd and 3rd lines of defense.

June 18, 2024

Kingdom of the Netherlands-The Netherlands: Financial Sector Assessment Program- Technical Note on Securities Regulation and Supervision

Description: Regulation of securities and derivatives markets in the European Union (EU) has changed materially since the last Netherlands FSAP, with further reforms underway. Major reforms for securities and derivatives trading were implemented through Markets in Financial Instruments Directive and Regulation II (MiFID II) in 2018, and revisions agreed in 2023 will bring further changes in the coming years, including plans to support greater consolidation of transaction data. In asset management, the Alternative Investment Fund Managers Directive (AIFMD) review is incorporating among other changes enhanced provisions on liquidity management, and for Undertakings for Collective Investment in Transferable Securities (UCITS) a new regulatory regime for depositories was put in place.

June 18, 2024

Kingdom of the Netherlands-The Netherlands: Financial Sector Assessment Program- Technical Note on Supervision and Disclosure of Climate-Related Risks

Description: Dutch financial institutions are exposed to the effects of climate change through both physical and transition risks. Physical risks are mostly represented by flood risk while transition risks are primarily driven by the structure of the Dutch economy, including a significant exposure to agriculture. The Dutch authorities have made significant efforts to respond to climate related risks comprehensively through identification of risk drivers and analysis of their impacts, accompanied by strong policy initiatives aimed for mitigation and adaptation.

June 18, 2024

Kingdom of the Netherlands-The Netherlands: Financial Sector Assessment Program- Technical Note on Insurance and Pension Fund Regulation and Supervision

Description: The Dutch insurance sector is undergoing further consolidation, the life sector has been steadily shrinking over the last two decades, and the non-life market is relatively saturated. Sales of new life products, especially individual life business, have decreased since the early 2000s, putting pressure on the business models of life insurers. The non-life market is dominated by compulsory health insurance, which covers medical expenses and has replaced public health insurance in the 1990s. Dutch insurers have also become more domestically oriented–among the large life insurers (or their respective parent groups), those who received government funding during the global financial crisis were required to restructure parts of their business.

June 18, 2024

Kingdom of the Netherlands-The Netherlands: Financial Sector Assessment Program- Technical Note on Macroprudential Policy Framework

Description: Macroprudential policy in the Netherlands has centered on the residential real estate (RRE) market given the importance of this market for households, banks, and insurers. RRE represents nearly 50 percent of total household assets, and housing loans account for about 85 percent of total household liabilities, more than half of Dutch banks’ domestic loan portfolio, and 15 percent of insurers’ assets. Authorities have therefore actively used RRE-related macroprudential tools, such as banks’ capital risk weighting of residential mortgage loans, limits on loan-to-value (LTV) and debt service-to-income (DSTI) ratios for mortgages, or mortgage interest deductibility from taxes (MID).

June 17, 2024

Argentina: Eighth Review Under the Extended Arrangement Under the Extended Fund Facility, Requests for Modification of Performance Criteria, Waivers of Nonobservance of Performance Criteria, and Financing Assurances Review-Press Release; Staff Report; and Statement by the Executive Director for Argentina

Description: Decisive implementation of the stabilization plan—centered on a strong fiscal anchor with no new monetary financing, and relative price corrections—has led to twin fiscal and external surpluses, a marked turnaround in reserves, faster-than-expected disinflation, a bolstering of the BCRA’s balance sheet and a reduction in sovereign spreads to multi-year lows. Selected easing of FX restrictions and deregulatory efforts are improving resource allocation. Nevertheless, macroeconomic imbalances and growth bottlenecks remain sizable and a long and difficult adjustment process still lies ahead, where policies need to evolve to build on earlier gains and support a turnaround in activity. Efforts are also underway to build political and societal support for reforms, as well as to scale up social assistance to protect the most vulnerable and ensure the burden of the adjustment does not fall disproportionally on working families. That said, delays in securing key legislation in Congress have led to some market volatility.

June 17, 2024

Republic of Armenia: Third Review under the Stand-by Arrangement and Request for Modifications of Performance Criterion and Monetary Policy Consultation Clause-Press Release; Staff Report

Description: The Armenian economy continues to perform strongly, and the outlook is broadly positive. Growth is decelerating gradually to more sustainable levels, as foreign exchange and migrant inflows peter out. Inflation has rapidly declined due to low imported food and energy inflation, Dram appreciation, and tight monetary policy. The uncertain external environment, however, poses sizeable risks, including from a slowdown in main trading partners, geopolitical tensions, and a possible reversal of capital flows.

June 14, 2024

Costa Rica: Sixth Review Under the Extended Arrangement Under the Extended Fund Facility, Third Review Under the Resilience and Sustainability Facility Arrangement, and Monetary Policy Consultation Clause

Description: Recent developments and outlook. Growth accelerated to 5.1 percent in 2023 and is projected to remain robust at 4 percent in 2024. Inflation (year-on-year) has stayed negative since mid-2023, triggering Board Consultation under the Monetary Policy Consultation Clause. However, as base effects drop out of the year-on-year calculation, headline inflation is expected to return to the central bank’s tolerance band (2-4 percent) by late 2024. Formal employment, private-sector wages, and poverty are all moving in the right direction.

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