The Report of the Commission on the Structure of Dutch Banks
On 28 June 2013 the Commission on the Structure of Dutch Banks issued its report Towards a Serviceable and Stable Banking Sector. In its report, the commission formulates eleven important recommendations.
On 28 June 2013 the Commission on the Structure of Dutch Banks (in Dutch the Commissie Structuur Nederlandse Banken, also referred to as the Wijffels Commission) issued its report Towards a Serviceable and Stable Banking Sector (in Dutch Naar een Dienstbaar en Stabiel Bankwezen). This commission was set up by the Secretary of Finance at the request of Parliament. Its remit was to investigate the possible implementation of the recommendations made by the High Level Expert Group on Reforming the Structure of the EU Banking Sector (the Liikanen Commission) of October 2012 (among others on mitigating the risks of proprietary trading), and as well to investigate the introduction of resolution mechanisms for failing banks (with particular regard to the continuity of payment systems). However, the commission made eleven recommendations that are of much wider purport. These recommendations are the following:
- The banking sector should be serviceable and stable. Serviceable means that banks offer all banking products that the economy as a whole, citizens and firms, need. Stable means that banks are resilient.
- The banking sector should be as diversified as possible in terms of size, clients, national or international orientation, ownership and national progenity.
- The structure of the banking sector should be competitive, to be achieved inter alia by completing the European internal market for banking services with a banking union.
- The governance of banks should be strengthened by intensifying the supervision exercised by non-executive directors.
- Institutional investors should play a role in taking over mortgages from banks in order to make mortgages more widely available at lower prices.
- Individual banks and the banking sector as a whole should be made more stable by enhancing capital requirements without reducing the flow of credit.
- The European Union should strive for the development of bail-in mechanisms for the resolution of failing banks that clearly identify the sequence of risk bearers.
- As the Liikanen Commission recommended, proprietary trading by deposit banks above a certain level should be ring-fenced in order to reduce the risk profile of such banks.
- Banks should be structured in a way that allows, if they fail, both their resolution and the separation of activities that are systemically relevant.
- A future European banking union should be set up in concert with both banking supervision on a European level and the introduction of resolution mechanisms for failing banks.
- Banks should regain the trust of society. This can be achieved by banks stating their vision on their role in society explicitly in a ‘public statute’.