The Netherlands Authority for the Financial Markets (AFM) considers the Scheltema Committee’s thorough investigation of the failure of DSB Bank to be of great importance. The problems had serious consequences for both customers and employees of DSB Bank and for the financial sector in general. As the supervisory body with responsibility for the interests of consumers and investors, the AFM treats the findings in the Committee’s report as highly significant.
The AFM endorses both the positive and the critical conclusions made by the Scheltema Committee regarding the supervision of DSB Bank conducted by the AFM. The AFM also accepts the Committee’s recommendations with regard to the changes to supervisory duties. In the changes to regulation and supervision, the AFM will work closely with the Ministry of Finance and its fellow regulators at De Nederlandsche Bank.
One of the conclusions of the Scheltema Committee is that the supervision of DSB by the AFM was “in general adequate”. According to the Committee, the AFM had a good understanding of the problems at DSB and in general it acted appropriately. The Committee further stated that since the passing of the principal legislation in 2006, formal enforcement by the AFM has been introduced effectively. The AFM agrees with this assessment, which is also supported by the facts.
The Scheltema Committee takes the view that the AFM could have acted to deal with obvious abuses at an earlier stage if the AFM had focused less on a market-wide approach and refined enforcement. The Committee acknowledges that the necessary legislation* (especially regarding the most important problem of single-premium policies) was only introduced at a late stage. Moreover, the AFM has to act in accordance with public standards and deregulation was a prominent item on the political agenda at that time.
We agree with the Scheltema Committee that the AFM can and should speed up its own operations. Since 2008, the AFM has been running an improvement programme designed to identify risks earlier and introduce tighter control of processing times. Significant progress has been made in the last two years, as also shown by the quadrupling of formal enforcement measures in this period. The AFM is aware that its responsiveness still has to be further improved in certain areas. As the Committee states, the AFM can remove the most serious problems from the market, even before regulatory standards are refined in consultation with market participants.
Since 2000, DSB was able to grow for many years in a lenient regulatory environment. As the Committee acknowledges, the AFM could only take real enforcement action once its powers had been significantly extended. Much tighter regulation has been in effect since 2006, and the AFM has established clear frameworks for the implementation of public standards in the law. This means that it is now less likely that similar breaches of the duty of care can occur on the same scale. However, the AFM shares the opinion of the Committee that further tightening of the legislation is desirable.
The AFM has already argued for a stronger legal basis for the duty of care, which will enable us to supervise the product development process. The Committee endorses this view. It also argues for a legal basis for supervision of the protection of the interests of consumers with complaints. The move towards supervision of governance and a client-oriented culture proposed by the Committee is another suggestion that we endorse. The Committee notes that the AFM has already taken steps in this direction through its requirement that providers implement integrated improvement programmes and its use of a ‘track record’ for directors.
The AFM promotes fairness and transparency within financial markets. We are the independent supervisory authority for the savings, lending, investment and insurance markets. The AFM promotes the conscientious provision of financial services to consumers and supervises the honest and efficient operation of the capital markets. Our aim is to improve consumers’ and the business sector’s confidence in the financial markets, both in the Netherlands and abroad. In performing this task the AFM contributes to the prosperity and economic reputation of the Netherlands.
* Advisory rules with exception for loan protection insurers as at 1-7-2006, cancelled exemption for loan protection insurers under advisory rules as at 1-7-2008, rules for transparency and appropriate commissions for loan protection insurers as at 1-1-2010.
The AFM is committed to promoting fair and transparent financial markets.
As an independent market conduct authority, we contribute to a sustainable financial system and prosperity in the Netherlands.