Bank resolution in the Netherlands
How does De Nederlandsche Bank prepare for possible failure of medium-sized and small banks?
Since 1 January 2016, the European Single Resolution Board (SRB) has borne ultimate responsibility for the controlled and orderly resolution of significant banks that are in danger of failing. Responsibility for the resolution of medium-sized and small banks lies with the national resolution authorities. The national resolution authority in the Netherlands is the Dutch Central Bank (De Nederlandsche Bank, DNB). The Netherlands Court of Audit audited the preparations made by DNB for the resolution of failing medium-sized and small banks.
Resolution of failing banks: not all resolution plans completed yet
Although progress has been made with resolution planning for medium-sized and small banks, we found that not all plans had been fully completed yet. Since March 2019, DNB has prepared and endorsed resolution plans for the vast majority of Dutch medium-sized and small banks. While complying with statutory requirements, these plans are concise.
We also examined how the Minister of Finance, who is responsible for supervising DNB’s resolution activities, discharges his responsibility. We found that the Minister does not exercise full supervision of DNB. This means that he does not have up-to-date information on the general state of resolution planning for medium-sized and small banks in the Netherlands. Precisely because DNB is still in the process of fleshing out its role as the national resolution authority, we had expected the Minister to play a more active role in supervising DNB’s resolution activities, also in the light of his responsibility for the stability of the financial system and his role as the national treasurer.
Why did we audit the preparations made by DNB for the resolution of medium-sized and small banks in serious financial trouble?
During the financial crisis, banks in many EU countries were rescued with the aid of public funds. In order to prevent this from happening again, the European Union established a banking union, of which all euro-area countries are automatically members. The banking union supervises banks and ensures that failing banks are ‘resolved’ in a controlled and orderly fashion. The national resolution authorities are responsible for the resolution of medium-sized and small banks. The national resolution authority in the Netherlands is DNB.
In view of the massive social and financial concerns involved, we examined the organisational structure of the national resolution authority, and assessed whether it has sufficient staff capacity and resources at its disposal to perform its activities and whether robust resolution plans have been put in place.
The audit report was published at 2.30 pm on 12 December 2019 and explained to the Dutch House of Representatives.