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)
Date: 2003-10-24
Institutions: European Central Bank
Subjects: Netherlands, central bank, financial stability, financial supervision, insurance company, national law, pension fund

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 draft 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  Council

Decision 98/415/EC of 29 June 1998 on the consultation of the European Central Bank by national
authorities regarding draft legislative provisions1, 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 the
European 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  Dutch

Government’s aim, once it had consulted market participants, was to replace the existing sectoral

prudential supervision approach in the Netherlands with a functional approach. This would entail

attributing  prudential  supervision  tasks  relating  to  all  credit  institutions,  pension  funds  and

insurerance undertakings, as well as the responsibility for the supervision of the financial system as

a  whole,  to  a  new  institution.  This  new  institution  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 and

consumer protection issues. In order to support its decision, the Government provided Parliament

1 

OJ L 189, 3.7.1998, p. 42.

                                                     
with  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  were

represented on the respective boards of both DNB and the PVK. This model was followed in April

2002 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  in

2002 on the basis of the above-mentioned memorandum and a covenant between DNB, the PVK
and  the  Financial  Markets  Authority3.  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  the

financial system as a whole. This is the first time that the ECB has been consulted on the Dutch

reorganisation. 

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 transferred

to 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  legal

proceedings, 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 financial system,  in  particular  regarding  implementing

monetary  policy  and  ensuring  the  proper  functioning  of  payment  systems.  In  the  past  this

involvement  has  rarely  related  to  the  prudential  supervision  of  pension  funds  and  insurance

undertakings, which are generally not considered to pose the same degree of systemic risk as credit

institutions. However, over time the traditional borders between the banking and insurance segment

of 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  distribution

agreements between the two  sectors,  and the  growing  role of financial  conglomerates.  Given  the

significant extent to which this has been the case in the Netherlands, and in view in particular of the

important  role  in  the  Netherlands  of  financial  groups  that  combine  different  types  of  financial

services,  merging  the  prudential  supervision  of  credit  institutions,  pension  funds  and  insurance

undertakings into a single entity – DNB – should lead to a better understanding of the soundness of

individual  financial  conglomerates.  In  addition,  this  should  contribute  to  an  earlier  identification

and better monitoring of systemic risk, thus contributing to financial stability. For these reasons the

ECB  welcomes  the  fact  that  DNB  is  becoming  more  involved  in  the  prudential  supervision  of

pension funds and insurance undertakings. 

2 
3 

Hervorming van het toezicht op de financiële marktsector, Kamerstukken II 2001/02, 28122, nr. 2.
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.

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7. 

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  the

Statute 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  more  effective  both  internally  and  externally.

Increased  efficiency  will  benefit  supervised  institutions in  particular,  as  they  will  encounter  only

one interlocutor instead of two at the supervisory level. The supervised institutions will have less

onerous reporting obligations and directors, supervisory directors and key officers will be subject

to  a  single  review  process.  However,  adequate  safeguards  should  be  taken  to  ensure  that  the

reduction in administrative costs does not affect the quality of supervision. In particular during the

first phase of the merger due care should be taken that high standards of supervision continue to be

applied.  Moreover,  the  ECB  anticipates  that  these  changes  will  further  improve  the  quality  of

statistics 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  and

Employment.  As  is  further  elaborated  in  the  accompanying  explanatory  memorandum,  this

requirement  is  limited  to  DNB’s  function  as  insurance  sector  supervisor  and  does  not  therefore

infringe  on  DNB’s  (financial)  independence  as  an  NCB  within  the  European  System  of  Central

Banks 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 Employment must send Parliament a joint report on

the effectiveness and suitability of the work performed by the PVK with regard to its tasks pursuant

to:  the  Insurance  Industry  (Supervision)  Act  1993;  the  Pensions  and  Savings  Act;  the  Funeral

Insurance  Business  in  Kind  Supervision  Act;  the  Professions  Pension  Scheme  (Obligatory

Participation)  Act;  the  Industrial  Pension  Funds  (Obligatory  Participation)  Act  2000;  the

Introduction of an Age Limit for the Notarial Profession and the Notarial Pension Funds Act; the

Access to Medical Insurance Act 1998; and the FVP Privatisation Act. Thus the report focuses on

the  efficiency  and effectiveness  of  DNB’s  supervision  of the  pension  funds  and  insurance  sector

3

and 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

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