IMF/Bank of Israel Financial Sector Conference ISRAEL’S CAPITAL MARKET REFORMS: Supervisory Approaches and Managing Change: The Dutch Approach By Arthur Docters van Leeuwen
Reasons • • • The system changed March 1 st 2002. From three to two (DNB and AFM) Reasons fundamental: The Wallis Report (Australia). Reasons specific: – 80% of all financial business is provided for by four (now three) big financial institutions. – Rapid development of conduct of business regulation.
How did we do it? • First: change of mandates within existing legislation. • Later: a fundamental review and expansion of the legislation (WFT). • Instruments: – Council of financial regulators; – Move personnel from the one to the other; – Steering committees, project groups.
Difficulties • Who has the power to give permits? (and how is it possible for the one to influence the other) • In consultation or after consultation? • Who’s turf is the AO/IC?
How to manage the system • Covenant: – No overlap – Adjustment of inspection plans – Consultation about serious measures – Crisis management • Two directors responsible, every half year meetings of two boards • Rule for the two CEO’s: use the hotline!
Management of the environment • Internal may be the hardest part, old ways and bureaucratic enmities die hard. • Market participants: why change? We like our “old” regulator. • Ministry: a distant yet concerned approach, very disciplined concerning principles.
Tips • Not too much overlap: both regulators, need their own territory. • Maintain very good informal relations at the top and show it. • Show time and again that both really want this system to work.
Costs and Benefits Costs: • Enormous amount of work • Is the system fundamentally stable? Benefits: • More simple, less overlap • Better focus, improvement of professionalism (prudential versus conduct of business) • Sharpens the mind!
Conclusion • Nobody in the Netherlands wants to go back to the old system of three regulators. • The jury is out on the question whether we should merge into one regulator (FSA model). That depends on developments in Europe and the world. • The Dutch, market participants, regulators and politicians are happy with the new system.
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