Dutch Central Bank announces lowering the buffer requirement for banks to support lending
The government and various (international) supervisors are working on measures to limit the far-reaching consequences of the coronavirus. In this context, the Dutch Central Bank (De Nederlandsche Bank (DCB)) announced on 17 March 2020 that it will temporarily give banks additional leeway to continue lending (and increase it where possible). DCB has announced the following measures in this regard:
- Systemic risk buffer is lowered
- The introduction of floor for the risk weighting of mortgage loans will be postponed
With these measures, DCB expects at least EUR 8 billion in capital to be released from Dutch banks. This should allow banks to continue with providing loans even in the event of increasing losses. DCB estimates the total effect on lending to be EUR 200 billion. DNB has expressly stated that banks should use this release of capital to support lending and that they should not use the freefall for paying out dividends or share purchases.
The measures will remain in force for as long as necessary. After that, the capital requirements will be gradually brought back to the current level of capital requirements.
DCB is of the opinion that the Dutch banking sector is well capitalized and has built up sufficient buffers in recent years so that it can properly absorb the negative impact caused by the coronavirus. The measures should therefore not threaten the stability of the financial sector.
Ploum’s banking & finance team will keep you regularly informed of further developments that may be relevant in the context of financing and liquidity.
For questions or information, please contact Matthijs Bolkenstein or Lucas Lustermans
Matthijs Bolkenstein Lucas Lustermans
+31 6 4663 0866 +31 6 1985 0096