Opinion of the European Central Bank of 7 June 2004 at the request of the Ministry of Finance of the Netherlands on a draft Financial Sector Supervision Act (CON/2004/21)
Date: 2004-06-07
Institutions: European Central Bank
Subjects: Netherlands, banking supervision, central bank, financial stability, financial supervision, national law

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 7 June 2004 

at the request of the Ministry of Finance of the Netherlands 

on a draft Financial Sector Supervision Act 

(CON/2004/21) 

1. 

On 6 May 2004 the European Central Bank (ECB) received a request from the Ministry of Finance 

of  the  Netherlands  for  an  opinion  on  the  Voorstel  Wet  op  het  financieel  toezicht  (draft  Financial 

Sector Supervision Act – hereinafter the ‘draft act’). 

2. 

The  ECB’s  competence  to  deliver  an  opinion  is  based  on  the  third,  fifth  and  sixth  indents  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,  as  the  draft  act 

concerns  national  central  banks  (NCBs),  payment  and  settlement  systems  and  rules  applicable  to 

financial institutions in so far as they materially influence the stability of financial institutions and 

markets.  In  accordance  with  the  first  sentence  of  Article  17.5  of  the  Rules  of  Procedure  of  the 

European Central Bank, the Governing Council has adopted this opinion. 

3. 

Previously  De  Nederlandsche  Bank  (DNB)  was  in  charge  of  supervising  credit  institutions  and 

investment firms, while the Pensions and Insurance Supervisory Authority Foundation (PVK) was 

in  charge  of  supervising  insurance  companies  and  pension  funds  and  the  Authority  for  Financial 

Markets (AFM, previously STE) was in charge of supervising securities firms and markets. Under 

the new functional model introduced by the draft act, DNB and the PVK after being merged under 

the  name  DNB  will  be  responsible  for  prudential  supervision  of  the  entire  financial  sector.  The 

AFM  will  be  responsible  for  conduct  of  business  supervision  and  will  focus  on  ensuring  orderly 

and  transparent  financial  market  processes,  clear  relationships  between  market  entities  and  that 

consumers are treated with due care. 

The reforms proposed in the Parliamentary report are being implemented in two phases. The first 

phase involved adapting certain regulations and concluding covenants between the two supervisors 

to redistribute their respective supervisory responsibilities. This phase was completed in September 

2002. In the second phase other laws will be amended to take account of this new situation. The 

first legal act to be proposed in this phase is the proposed law on provisions concerning the merger 

1 

OJ L 189, 3.7.1998, p. 42. 

 
 
 
                                                      
of  DNB  and  the  PVK,  on  which  the  ECB  was  consulted  in  October  2003  (CON/2003/23)2.  The 

ECB  refers  to  this  opinion  with  regard  to  the  statements  made  on  DNB’s  role  in  prudential 

supervision  and  protecting  the  quality  of  supervision  while  reducing  administrative  costs.  In  the 

current opinion the ECB addresses only issues raised by the section of the draft act on which it is 

consulted. 

The  draft  act  is  divided  into  five  sections.  Section  one  sets  out  general  provisions;  section  two 

covers  prudential  supervision;  section  three  deals  with  market  conduct  supervision;  section  four 

concerns  infrastructure  supervision;  and  section  five  contains  final  and  transitional  provisions. 

Section  two  assigns  responsibility  for  prudential  supervision  to  DNB  whereas  responsibility  for 

market  conduct  supervision  is  assigned  to  AFM  under  section  three.  Under  section  four 

infrastructure  supervision  is  a  shared  competence  of  both  DNB  and  the  AFM.  The  current 

consultation of the ECB relates only to section one. 

4. 

The ECB welcomes the fact that, having thoroughly considered the different approaches adopted in 

other  Member  States  and  elsewhere,  the  Dutch  authorities  have  adopted  a  functional  division  of 

labour  with  regard  to  supervising  the  financial  sector.  In  particular,  the  draft  act  envisages 

allocating regulatory and supervisory tasks on the basis of the functional approach as follows: DNB 

will  be  responsible  for  safeguarding  financial  stability  and  for  the  prudential  regulation  and 

supervision  of  the  entire  financial  sector,  while  the  AFM  will  be  responsible  for  conduct  of 

business  supervision  as  described  above.  This  allocation  of  tasks  demonstrates  a  very  good 

understanding  of  current  financial  system  developments  and  addresses  the  supervision  of  this 

changing market effectively, fully acknowledging DNB’s essential role in promoting the safety and 

soundness of financial institutions and the stability of the financial system as a whole.  

The  ECB  welcomes  the  proposed  institutional  framework,  in  particular  in  so  far  as  it  pursues  a 

functional  model  that  organises  the  instruments  and  responsibilities  of  financial  regulation  and 

supervision  around  the  two  primary  public  objectives  in  this  area,  namely  that:  (i)  DNB  is 

mandated  with  a  clear  financial  stability  objective  and  entrusted  with  extensive  supervisory 

responsibilities over individual financial institutions; and (ii) the AFM is entrusted with the main 

task  of  market  conduct  supervision.  The  new  structure  acknowledges  the  growing  importance  of 

financial groups that provide different types of financial services. In order to address the specific 

prudential  concerns  related  to  such  groups  and  ensure  an  overall  level  playing  field  among 

competing  intermediaries,  an  effective  coordination  between  the  supervisory  policies  and 

regulation in all sectors of financial activity is also required.  

From  the  ECB’s  perspective,  this  approach  recognises  the  distinct  character  of  the  two  goals  of 

financial stability and investor protection, taking into account that the nature and scope of systemic 

risk  is  widening  due  to  the  closer  links  between  credit  institutions,  insurance  companies, 

2  

The law on which the ECB was consulted concerned the formal merger of the two bodies into one authority. The scope of 
its non-ESCB related tasks remained to be formally defined in the draft Financial Supervision Act. The draft merger act is 
currently being discussed in Parliament. 

2 

                                                      
investment firms and pension funds. At the same time, it should be noted that financial stability and 

investor  protection  are  complementary  objectives  and  must  be  pursued  consistently  by  the 

authorities to which they are entrusted, with both authorities acting in close cooperation.  

5. 

The  ECB  notes  as  a  matter  of  general  concern  that  the  Minister  of  Finance’s  influence  over  the 

supervisory  authorities  is  increased.  The  ECB  welcomes  the  fact  that  supervisors  are  to  be  held 

accountable  for  their  actions,  as  this  will  enhance  their  efforts  to  maintain  the  highest  possible 

standards  of  supervision.  The  ECB  understands  that  the  role  of  the  Minister  will  continue  to  be 

based on the principle of ‘supervision at a distance’. This principle guarantees relative autonomy to 

the supervisors, implying that the Minister of Finance will only carry out an investigation into the 

Act’s adequacy or the way in which the supervisor implements or has implemented it where his ‘at 

a  distance’  responsibility  requires  it.  The  Minister  of  Finance  monitors  the  exercise  of  the 

supervision and must be able to form a correct assessment of the manner in which the supervisor 

implements  or  has  implemented  the  law.  However,  it  should  be  acknowledged  that  such 

accountability cannot apply to DNB’s ESCB-related functions. While it is recognised that the draft 

act  in  no  way  intends  to  affect  these  tasks,  nevertheless,  the  ECB  would  welcome  an  explicit 

statement regarding the scope of this important principle. Furthermore, a similar qualification could 

usefully be introduced in Article 1(2)(1) of the draft act. 

6. 

A number of important general definitions will be provided in Article 1(1)(a) of section one. The 

list of definitions is currently incomplete. The ECB notes that the explanatory memorandum states 

that  only  where  definitions  under  the  draft  act  need  to  differ  from  definitions  provided  in  other 

legal  acts  will  they  be  defined  in  the  draft  act.  The  ECB  underlines  that  that  all  terms  and 

definitions, e.g. electronic money, branch office, qualified holding and credit institution, should be 

in  line  with  those  already  existing  in  EU  Regulations  or  Directives  such  as,  inter  alia,  the 
Consolidated  Banking  Directive3,  the  E-money  Directive4  and  the  Directive  on  Markets  in 
Financial Instruments5. 

7. 

Article  1(2)  of  section  one  details  the  budgetary  framework  for  the  supervisory  bodies  under  the 

draft  act.  The  draft  act  requires  both  supervisory  bodies  to  submit  their  budgets,  where  these 

concern the supervisory tasks undertaken in accordance with sections two to four, to the Minister of 

Finance  for  approval.  It  should  be  noted  that  the  1998  European  Monetary  Institute  (EMI) 

Convergence Report states that where third parties, in particular the Government, are in a position, 

directly or indirectly, to exercise influence on the determination of an NCB’s budget, the relevant 

statutory  provisions  should  contain  a  safeguard  clause  that  this  does  not  impede  the  proper 

performance of the NCB’s ESCB-related tasks. The ECB considers it essential that approval from 

3  

4  

5  

Directive  2000/12/EC  of  the  European  Parliament  and  of  the  Council  of  20  March  2000  relating  to  the  taking  up  and 
pursuit of the business of credit institutions, OJ L 126, 26.5.2000, p. 1. 
Directive 2000/46/EC of the European Parliament and of the Council of 18 September 2000 on the taking up, pursuit of 
and prudential supervision of the business of electronic money institutions, OJ L 275, 27.10.2003, p. 39 
Directive  2004/39/EC  of  the  European  Parliament  and  of  the  Council  of  21  April  2004  on  markets  in  financial 
instruments  amending  Council  Directives  85/611/EEC  and  93/6/EEC  and  Directive  2000/12/EC  of  the  European 
Parliament and of the Council and repealing Council Directive 93/22/EEC, OJ L 145, 30.4.2004, p. 1. 

3 

                                                      
the  Minister  is  restricted  to  the  budget  for  prudential  supervision  tasks  and  would  recommend 

including  wording  that  specifically  excludes  approval  of  the  budget  for  ESCB-related  tasks  of 

DNB.  

Under Article 1(2)(l) the Minister of Finance has the authority to request any information required 

to assess the feasibility of general policy intentions and draft legal provisions, where these relate to 

the supervision to be carried out by the supervisor in accordance with the draft act. The ECB notes 

that  a  similar  provision  exists  in  current  financial  supervisory  legislation.  The  ECB  understands 

that this provision does not apply to DNB’s ESCB-related tasks. Indeed, Article 18(2) of the Bank 

Act 1998 already lays down DNB’s obligation to provide information to the Minister of Finance 

when so requested. However, here the obligation is qualified by the need to take into account the 

relevant provisions of the Treaty and the Statute of the European System of Central Banks and of 

the European Central Bank. 

8. 

Article 1(2)(h) of section one requires any proposed amendment to the Statutes of the supervisory 

authorities be submitted to the Minister of Finance for prior consent. The current wording of this 

provision  is  incompatible  with  Article  108  of  the  Treaty  in  so  far  as  it  concerns  DNB.  Under 

Article  108  of  the  Treaty,  when  exercising  the  powers  and  carrying  out  the  tasks  and  duties 

conferred upon it by the Treaty and the ESCB/ECB Statute, neither an NCB nor any members of its 

decision-making  bodies  will  seek  or  take  instructions  from,  inter  alia,  any  government  of  a 

Member State or from any other body. The ECB recognises that the Government will be involved 

in any proposed amendment to DNB’s Statute in its capacity as sole shareholder in DNB. However, 

this Article should not extend to amendments to provisions of DNB’s Statute that concern DNB’s 

ESCB-related tasks or both its ESCB-related and non-ESCB-related tasks.  

9. 

The  ECB  understands  that  the  provisions  on  international  cooperation  and  confidentiality  will 

provide that DNB may cooperate with other third country supervisors and pass on information on 

the basis of reciprocity, if all other conditions are met. The ECB understands that these provisions 

will be interpreted in accordance with the relevant provision of DNB’s Statute and the Bank Act 

1998,  which  ensure  compliance  with  DNB’s  obligations  under  the  Treaty  and  the  ESCB/ECB 

Statute.  

The  ECB  notes  that  the  draft  article  1(5)(1)(f)  would  allow  DNB  and  the  AFM  to  exchange 

confidential  information  with  the  ECB,  a  foreign  central  bank  or  other  foreign  institution,  to  the 

extent  that  this  is  conducive  to  fulfilling  the  ECB’s,  a  foreign  central  bank’s  or  other  foreign 

institution’s  ‘monetary  task’.  The  drafting  of  the  latter  part  of  this  Article  appears  to  be 

insufficiently comprehensive. This term ‘monetary task’ could be narrowly interpreted as excluding 

the  ECB’s  and  EU  NCBs’  tasks  in  the  field  of  ‘the  smooth  operation  of  payment  systems’  and 

contributions  ‘to  the  smooth  conduct  of  policies  pursued  by  the  competent  authorities  relating  to 

the prudential supervision of credit institutions and the stability of the financial system’. To ensure 

an  optimal  exchange  of  information  in  this  area  the  ECB  would  recommend  redrafting 

Article 1(5)(1)(f) so that it includes an explicit reference to all ‘ESCB-related tasks’.  

4 

10.  The ECB notes that due to the individual drafting schedules for the five sections of the draft act, it 

is  not  possible  at  this  stage  to  provide  a  comprehensive  opinion  on  the  full  scope  of  the 

restructuring of  the  supervisory  framework.  The  ECB  looks  forward  to  being able  to  supplement 

this opinion when it is consulted on the other sections. 

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, 7 June 2004. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

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