(May 11, 2010) The de Wit Commission, a Dutch parliamentary group set up in 2009 to examine developments and problems in the world financial system in general and of the Netherlands' financial system in particular, published its findings on May 10, 2010. More specifically, the mandate of Commission Chairman Jan de Wit of the Socialist Party and seven other MPs was first, to “examine the cause of the credit crisis, structural problems and measures taken,” and second, to review the period since September 22, 2008, the date when the government intervened in the Dutch financial sector. (President of the Dutch House of Representatives Received the Report of the Committee on the Financial System, May 10, 2010, The Dutch House of Representatives website, available at http://www.houseofrepresentatives.nl/news/newspage_report_committee_rese
The Parliamentary Inquiry Financial System Report is entitled for short “Credit Lost” (Verloren krediet). In January and February 2010, the Commission questioned, in 40 hearings, almost 40 bankers, financial service regulatory officials, politicians, and academics. (De Wit Commission Report into Financial Crisis Published Today, DUTCH NEWS NL, May 10, 2010, available at http://www.dutchnews.nl/news/archives/2010
/05/de_wit_commission_report_into.php; TWEEDE KAMER DER STATEN-GENERAAL [House of Representatives, Netherlands Parliament)], CREDIT LOST [Summary in English] [also translated as “Lost Credit”], Report of the Parliamentary Committee Inquiry Financial System, May 10, 2010, [the hearings are included as an annex to the full report in Dutch, available at http://www.tweedekamer.nl/images/Eerste_rapport_onderzoekscommissie_financieel_stelsel_118-206529.pdf].)
The crisis began in 2007 and forced the government to nationalize Fortis and ABN Amro banks and issue loans of almost €14 billion (about US$18 billion) to global financial services company ING, life insurance and pension group Aegon, and financial services group SNS Reaal. (Id.; see also DLA Piper, Summary of the Netherlands Rescue Plan to Stabilise the Financial [sic], Jan. 19, 2009, available at http://www.dlapiper.com/files/upload/DLA_Piper_EMEA_Govt_Rescue_Plan_EME
A_Govt_Rescue_Plan_Netherlands_19_Nov.PDF.) In late 2009, Aegon and SNS Reaal apparently repaid part of the government aid they had received in late 2008. (Press Release, The Netherlands Ministry of Finance, AEGON and SNS REAAL Pay Back Part of State Aid (Dec. 1, 2009), available at http://www.minfin.nl/english/News/Newsreleases/2009/12/AEGON_and_SNS_REA
According to NOS (Nederlandse Omroep Stichting) (Netherlands Broadcasting Foundation) TV, the following general conclusions can be drawn from the Commission report: the banking culture encouraged recklessness because of “its emphasis on profits, returns and bonuses,” there are gaps in the regulatory system, supervision over financial institutions was insufficient, and more international cooperation is needed in the financial services sector. (DUTCH NEWS NL, supra.)
More specifically, the report makes 27 recommendations and also offers two case studies (involving ABN AMRO and Icesave/Landsbanki) as illustrative lessons for purposes of future regulation and supervision. (CREDIT LOST, supra.) Among the recommendations are the following:
1. Provide information regarding macro-economic risks to the financial system.
The CPB (the Netherlands Bureau for Economic Policy Analysis) and DNB (De Nederlandsche Bank) should jointly inform the legislature at least once a year of international and national macro-economic developments in the financial sector, indicate the possibilities and policy options available to the Netherlands for risk management and the policy considerations involved, and point out the legislative adjustments the CPB and DNB consider desirable. The Commission contends that “actions of the dominant actors within the system – financial institutions – played a major role in the emergence of the crisis” and that boards of directors of the institutions “deserve the primary blame for [the institutions'] systematic underestimation of and/or failure to recognize Important risks within the financial system and having “too little insight into the risks to their own balance sheets.” This criticism “[t]o varying degrees … applies to financial institutions in the Netherlands as well.” (Id.)
2. Ensure compliance with the Banking Code.
3. Supplement and strengthen the Banking Code in the area of risk management.
4. Supplement and strengthen the Banking Code in the area of compensation policy.
For example, in regard to limits on severance pay and claw-back provisions, the report states, compensation principles should apply not only to directors and senior management but to all of a company's employees.
5. Set limits on compensation as a condition for state support.
The Commission “agrees with the Minister of Finance's proposal to impose far-reaching conditions regarding the compensation of directors in financial companies that receive government support.” (Id.)
It further states:
More specifically, the consequences for the compensation of directors should be identical to those that apply in cases of bankruptcy: outstanding option or share packages and conditionally approved long-term bonuses will be cancelled. The supervisory board should determine whether it is possible to retrieve bonuses that have been paid out in the past. In this case as well, the scope of these regulations should be extended to include the entire organisation, if possible. If necessary, the legislation should be adjusted to allow for this possibility. (Id.)
Some of the other recommendations call for responsible shareholdership; adoption of regulations that are preferably “global or European, but national if necessary and possible”; a gradual increase in minimal capital requirements, in particular through the use of cyclical economic reserves; separation of commercial and investment banking activities within the same institution; assessment of financial stability as an important criterion for takeovers and mergers;expansion of government instruments for intervention; and increased transparency in extra-parliamentary influence and lobbying activities. (Id.)