EN
OPINION OF THE EUROPEAN CENTRAL BANK
of 24 October 2003
at the request of the Ministry of Finance of the Netherlands
on a draft law on provisions concerning the merger of De Nederlandsche Bank and the Pensions
and Insurance Supervisory Authority Foundation
(CON/2003/23)
1. On 2 September 2003 the European Central Bank (ECB) received a request from the Ministry of
Finance of the Netherlands for an opinion on a draf t law on provisions concerning the merger of De
Nederlandsche Bank N.V. and the Pensions and Insurance Supervisory Authority Foundation(Bepalingen in verband met de fusie van De Nederlandsche Bank N.V. en de Stichting Pensioen- &
Verzekeringskamer ) (hereinafter the ‘draft law’).
2. The ECB’s competence to deliver an opinion is based on the second indent of Article 105(4) of the
Treaty establishing the European Community and the third indent of Article 2(1) of CouncilDecision 98/415/EC of 29 June 1998 on the consultation of the European Central Bank by nationalauthorities regarding draft legislative provisions
1, since the draft law concerns the national central
bank (NCB). In accordance with the first sentence of Article 17.5 of the Rules of Procedure of theEuropean Central Bank, the Governing Council of the ECB has adopted this opinion.  
3. The draft law provides the legal basis for the merger of De Nederlandsche Bank (DNB) and the
Pensions and Insurance Supervisory Authority Foundation ( Stichting Pensioen- &
Verzekeringskamer  - PVK) and implements the Government’s intentions following the reallocation
of supervisory tasks and responsibilities that has been in progress since 2002. The DutchGovernment’s aim, once it had consulted market participants, was to replace the existing sectoralprudential supervision approach in the Netherlands with a functional approach. This would entailattributing prudential supervision tasks relating to all credit institutions, pension funds andinsurerance undertakings, as well as the responsibility for the supervision of the financial system asa whole, to a new institution. This new instit ution consists of DNB merged with the PVK. A
second institution, the Financial Markets Authority ( Stichting Autoriteit Financiële Markten ), will
concentrate on conduct aspects of financial institutions, the transparency of financial markets andconsumer protection issues. In order to support its decision, the Government provided Parliament
                                                     
1 OJ L 189, 3.7.1998, p. 42.
2with a memorandum entitled the ‘Reorganisation of  the prudential supervision of the financial
market sector’2.
4. The ECB notes in particular that the proposed model follows on from an earlier model adopted in
March 2002, according to which certain governing and supervisory board members wererepresented on the respective boards of both DNB and the PVK. This model was followed in April2002 by a formal cooperation agreement between the two authorities. This closer cooperation was
the logical consequence of the reallocation of supervisory responsibilities that was completed in2002 on the basis of the above-mentioned memorandum and a covenant between DNB, the PVKand the Financial Markets Authority
3. These agreements laid down a new supervisory structure
according to which prudential supervision, regarding the financial stability of financial institutions,
was assigned to DNB and the PVK. DNB also remained responsible for the supervision of thefinancial system as a whole. This is the first time that the ECB has been consulted on the Dutchreorganisation. 
5. The draft law merges the two legal entities, DNB and the PVK, to form a single legal entity, which
will retain the name De Nederlandsche Bank. Under the draft law the PVK’s assets are transferredto DNB and the PVK will cease to exist. All tasks attributed to the PVK by law are henceforth to
be carried out by DNB. All of the PVK’s rights and obligations, including any pending legalproceedings, are to be transferred to DNB. 
6. Central banks have traditionally been closely involved in the prudential supervision of credit
institutions due to their pivotal role in the fina ncial system, in particular regarding implementing
monetary policy and ensuring the proper functioning of payment systems. In the past thisinvolvement has rarely related to the prudential supervision of pension funds and insuranceundertakings, which are generally not considered to pose the same degree of systemic risk as creditinstitutions. However, over time the traditional borders between the banking and insurance segmentof the financial system have become increasingly blurred, as is demonstrated by the emergence of‘hybrid’ financial products, the increased use of risk transfer instruments and distributionagreements between the two sectors, and the grow ing role of financial conglomerates. Given the
significant extent to which this has been the case in the Netherlands, and in view in particular of theimportant role in the Netherlands of financial groups that combine different types of financialservices, merging the prudential supervision of credit institutions, pension funds and insuranceundertakings into a single entity – DNB – should lead to a better understanding of the soundness ofindividual financial conglomerates. In addition, this should contribute to an earlier identificationand better monitoring of systemic risk, thus contributing to financial stability. For these reasons theECB welcomes the fact that DNB is becoming more involved in the prudential supervision ofpension funds and insurance undertakings. 
                                                     
2 Hervorming van het toezicht op de financiële marktsector , Kamerstukken II 2001/02, 28122, nr. 2.
3 Convenant tussen Stichting Autoriteit Financiële Markten en  De Nederlandsche Bank N.V. respectievelijk Stichting
Pensioen- & Verzekeringskamerinzake de coördinatie van het toezicht , Amsterdam, 9 September 2002.
37. The ECB particularly welcomes the fact that the draft law attributes new responsibilities to DNB,
without affecting its powers in relation to the tasks it executes pursuant to the Treaty and theStatute of the European System of Central Banks and of the European Central Bank.
8. The ECB also welcomes the likely increase in the effectiveness and efficiency of prudential
supervision. The merged DNB will probably be mo re effective both internally and externally.
Increased efficiency will benefit supervised institutions in particular, as they will encounter onlyone interlocutor instead of two at the supervisory level. The supervised institutions will have lessonerous reporting obligations and directors, supervisory directors and key officers will be subjectto a single review process. However, adequate safeguards should be taken to ensure that thereduction in administrative costs does not affect the quality of supervision. In particular during thefirst phase of the merger due care should be taken that high standards of supervision continue to beapplied. Moreover, the ECB anticipates that these changes will further improve the quality ofstatistics transmitted to the ECB and at the same time keep the overall reporting burden low. 
9. The ECB notes that Article 7 of the draft law states that, by 1 November of each year, DNB must
specify a budget for its activities arising from: the Insurance Industry (Supervision) Act 1993  (Wet
toezicht verzekeringsbedrijf 1993 ), the Pensions and Savings Act ( Pensioen- en spaarfondswet );
the Funeral Insurance Business in Kind Supervision Act ( Wet toezicht natura-
uitvaartverzekeringsbedrijf ); the Professions Pension Scheme (Obligatory Participation) Act ( Wet
betreffende verplichte deelneming in een beroepspensioenregeling ); the Industrial Pension Funds
(Obligatory Participation) Act 2000 ( Wet verplichte deelneming in een bedrijfstakpensioenfonds
2000 ); the Introduction of an Age Limit for the Notarial Profession and the Notarial Pension Funds
Act ( Wet tot invoering van een leeftijdsgrens voor het notarisambt en de oprichting van een
notarieel pensioenfonds ); the Access to Medical Insurance Act 1998 ( Wet op de toegang tot
ziektekostenverzekeringen 1998 ); and the FVP Privatisation Act ( Wet privatiserinng FVP ). This
budget requires the approval of the Minister for Finance and the Minister for Social Affairs andEmployment. As is further elaborated in the accompanying explanatory memorandum, thisrequirement is limited to DNB’s function as insurance sector supervisor and does not thereforeinfringe on DNB’s (financial) independence as an NCB within the European System of CentralBanks as required by Article 108 of the Treaty.
10. The ECB notes that Article 8 specifies that in 2008, and thereafter every five years, the Minister for
Finance and the Minister for Social Affairs and Em ployment must send Parliament a joint report on
the effectiveness and suitability of the work performed by the PVK with regard to its tasks pursuantto: the Insurance Industry (Supervision) Act 1993; the Pensions and Savings Act; the FuneralInsurance Business in Kind Supervision Act; the Professions Pension Scheme (ObligatoryParticipation) Act; the Industrial Pension Funds (Obligatory Participation) Act 2000; theIntroduction of an Age Limit for the Notarial Profession and the Notarial Pension Funds Act; theAccess to Medical Insurance Act 1998; and the FVP Privatisation Act. Thus the report focuses onthe efficiency and effectiveness of DNB’s supervision of the pension funds and insurance sector
4and the explanatory memorandum emphasises that the report will not address DNB’s ESCB related
tasks. 
11. The ECB confirms that it has no objection to the competent national authorities making this
opinion publicly available at their discretion. This  opinion will be published on the ECB’s website
six months after the date of its adoption.
Done at Frankfurt am Main on 24 October 2003.
The President of the ECB
Willem F. DUISENBERG