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Dutch central bank to focus on integrity, future sustainability and restoration of financial buffers

The supervisory efforts of De Nederlandsche Bank (DNB) in 2014 will zoom in on integrity risks in the financial sector. DNB will also pay extra attention to the future sustainability of financial institutions, the restoration of financial buffers and the transition to common European banking supervision. These supervisory themes can be found in the ‘DNB Supervisory Themes 2014’ brochure published today.

The brochure informs the financial sector and the public on the thematic focal points selected for DNB’s supervisory efforts in 2014, alongside its regular supervisory work. The themes are largely a continuation of themes emphasised in 2013 and are the starting point for some 30 different examinations at financial institutions to be undertaken by DNB in 2014. DNB expects supervised institutions themselves to take any necessary measures in the risk areas identified in our brochure.

Integrity, conduct and culture
DNB’s 2014 focus on integrity is a continuation of the work performed in 2013. One of the 2014 examinations will address financial institutions’ analyses of risks associated with conflicts of interests, which builds on the 2013 thematic examination on corruption. Also, DNB has initiated an examination focussing on the vulnerability of processes of banks and other financial institutions in the Netherlands to possible manipulation of price-setting mechanisms on markets for currencies, derivatives and commodities. In addition, DNB will continue its examinations on conduct and culture within financial institutions, focussing on institutions where conduct and culture appear to cause long-standing problems, and on institutions going through significant organisational changes.

Future sustainability of business models
Financial institutions have to adjust to rapidly changing market conditions and new legislation, anticipating future risks and opportunities associated with their business models. DNB will examine banks’ funding strategies and dependency on market funding. As regards insurers and pension funds, DNB will see to their timely adjustment to changing conditions, and to their taking the necessary action now to ensure their continued long-term health.

Restoration of buffers
The economic climate and the European debt crisis continue to threaten the soundness of financial institutions. Financial institutions must have adequate financial buffers to be able to absorb unexpected adversities. In preparation for European banking supervision, DNB will perform an asset quality review at a number of banks as part of a European effort. As regards insurers and pension funds, DNB will assess their preparations for new financial requirements under Solvency II and the new financial assessment framework.

Source: Dutch central bank