Introductory remarks by DNB President Klaas Knot at the press
conference for the autumn 2020 Financial Stability Report
 Welcome to the press conference on the Financial Stability Report
(FSR). Before we start taking questions, let me briefly walk you
through the main elements of our FSR.
 As in the spring, the main focus of this report is - of course - the
impact of the coronavirus crisis on financial stability. This crisis
has now been going on for more than six months and the feared
second wave of infections is now a reality. Where do we stand in
this crisis and how has the financial sector fared so far? Let me say
a few things about that.
 First, uncertainty about the economic impact of this crisis remains
as substantial as before. The Dutch economy has so far contracted
somewhat less than we feared in the spring. But the resurgence in
the number of infections has fuelled renewed uncertainty, as new
measures seem necessary, but also because consumers and
entrepreneurs are becoming more cautious. A proper assessment
of the total economic damage will only be possible once the virus
is under control. And it is important to stress once again that the
economy and health are not in a zero-sum game. Even without
measures the economy will be hit. It is therefore of the essence that
everybody contributes to containing the virus. That is in the
interest of our health, but also in the interest of the economy.
 An important - and positive - observation is that the financial
system has so far proven resilient. That is of course partly due to
the fact that this crisis originated outside the financial system. In
that sense it is completely different from the credit crisis, when the
problems started in the financial sector itself and spilled over to
the economy. We can also see that the reforms undertaken after
the credit crisis are bearing fruit. Banks are therefore starting in a
much better position, so they are better able to dampen the impact
of the coronavirus crisis.
 Governments, central banks and supervisory authorities have
introduced very large-scale measures to curb damage to the
economy. It is still too early to evaluate these measures, but the
interventions have clearly restored a degree of calm to the
financial markets. The measures also directly and indirectly help
ensure that the financial sector can continue to fulfil its role
effectively.
 But a large part of the economic impact is yet to manifest itself.
When the government measures - such as the NOW scheme and
tax holidays - are scaled back and bank moratoria expire,
bankruptcies will rise. So, we will have to be prepared for that.
1) How is the financial sector faring more than six months into the
coronavirus crisis?
 Financial conditions have greatly improved since the spring due to
the massive central bank interventions, and market sentiment has
turned around as a result. The economic outlook is extremely
uncertain, but despite that investors seem broadly optimistic.
They seem to be counting on continued support from central banks
and governments. The sentiment is therefore somewhat artificial
and new corrections are looming. On top of that, there are
uncertainties surrounding Brexit and the US presidential elections.
 With regard to banks I would briefly like to recall the pandemic
stress test that we conducted in the spring. This stress test showed
that banks could continue to lend even in considerably adverse
economic conditions. Only in a so-termed perfect storm scenario
would they be forced to cut back their lending. Despite the
resurgence in the number of infections, the economic impact so far
has clearly been lower than in the two severe scenarios in the
stress test. Banks still remain sufficiently shock-resistant and have
been able to keep lending.
 But this is a period of calm before the storm for banks. Relatively
few firms and households have encountered financial difficulties
so far, but this will doubtless change. Particularly if the support
measures are wound down. Banks are well aware of this. It is why
they have set aside substantial provisions for possible loan
defaults in the future.
 Insurers are not being affected so directly by the coronavirus
crisis, but they have been under heavy pressure from persistently
low interest rates for a long time. This is especially impacting life
and funeral insurers.
 Pension funds saw their funding ratios hit hard in the spring, after
which a partial recovery set in. Their financial position
nevertheless remains vulnerable. A positive point is that the
pension agreement concluded during the summer meant
significant advances were made, towards a more future-proof
pension system.
2) What does all this mean for policy? How can we limit the damage to
the economy and the financial sector, particularly with the virus
resurging and the pandemic set to continue?
 The key challenge is still to prevent the economic crisis from
sparking a financial crisis. That really would exacerbate the
problems and push the economy into a negative spiral. All our
efforts are therefore focused on preventing that.
 The very extensive support measures introduced by governments
have so far helped the financial sector to dampen the shock rather
than reinforce it.
 Particularly now that a second wave has arrived, we need to be
especially cautious about a premature scaling back of these crisis
measures. That could inflict more severe damage to the economy
and pose larger risks to the financial sector. The cost of winding
measures down too early as yet outweigh the potential cost of
leaving them in place for too long. It is important that the support
measures are in due course rolled back in a gradual and
predictable way to prevent cliff-edge effects.
 In a severe shock such as this, which originated entirely outside
the sector, it is only logical for the government to absorb a large
part of the shock. The Netherlands can also afford a temporarily
higher public debt. The fact that the government has now laid
down its support measures for a longer period of time will help
reduce uncertainty for firms and households.
 The Netherlands of course also depends on what happens in other
countries. Our economy and financial sector are closely
interconnected with those of other European countries. The
creation of a European recovery fund during the summer was
therefore a positive move. We must prevent this crisis from
leading to even greater economic growth imbalances in Europe.
 As for DNB, we have given banks additional leeway to continue
lending and absorb any losses by adjusting the buffer
requirements for the major banks. In view of the current
uncertainty we will be continuing these crisis measures. At any
rate, the floor for the risk weighting of mortgage loans and the
countercyclical capital buffer will not come into force before the
end of 2021.
 In summary, we are still in a historically deep economic crisis.
Fortunately, this has not so far sparked a financial crisis. But with
the pandemic flaring up, economic uncertainty is yet again
increasing. The main challenge in this next phase is therefore to
limit the damage to the economy and prevent the crisis from
spreading to the financial sector.
 This concludes my introductory statement. I would be happy to
answer any questions you may have.