Dutch Banking Federation: Strict approach to Basel 4 implementation limits capacity for economic recovery

16 June 2021

The strict application of the Basel 4 capital requirements, as proposed by the Dutch Ministry of Finance and Dutch Central Bank (DNB) earlier this week, would limit the capacity for economic recovery.

Banks would be required to increase their buffers further while simultaneously meeting the societal expectation to finance the restarting of business activity in the Netherlands. This approach strongly contrasts with the supervisors’ reaction to the COVID-crisis, which gave flexibility to continue providing ample credit to companies affected by the lockdowns. The Dutch Ministry of Finance and the Dutch Central Bank (DNB) have repeatedly stated that Dutch banks are well capitalised. Now that we are at the start of the economic recovery and entering a period that will require significant investments, this policy position is not very helpful. Furthermore, it hampers the necessary financing of the sustainable and digital transformation to which banks would like to contribute. From this perspective, a more proportionate implementation of Basel 4 would be desirable.

he strict application of the Basel 4 capital requirements, as proposed by the Dutch Ministry of Finance and Dutch Central Bank (DNB) earlier this week, would limit the capacity for economic recovery. Banks would be required to increase their buffers further while simultaneously meeting the societal expectation to finance the restarting of business activity in the Netherlands. This approach strongly contrasts with the supervisors’ reaction to the COVID-crisis, which gave flexibility to continue providing ample credit to companies affected by the lockdowns. The Dutch Ministry of Finance and the Dutch Central Bank (DNB) have repeatedly stated that Dutch banks are well capitalised. Now that we are at the start of the economic recovery and entering a period that will require significant investments, this policy position is not very helpful. Furthermore, it hampers the necessary financing of the sustainable and digital transformation to which banks would like to contribute. From this perspective, a more proportionate implementation of Basel 4 would be desirable.

Dutch Banking Federation

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