NETHERLANDS Law and Practice Contributed by: Johannes de Jong and Juliet de Graaf, Osborne Clarke N.V.
7. Prudential Regime 7.1 Capital, Liquidity and Related Risk Control Requirements Prudential Regime for Banks The legal basis for prudential supervision in the Netherlands follows from CRR and CRD IV as implemented in the DFSA and the Decree on Prudential Rules for Financial Undertakings ( Besluit Prudentiële regels Wft , Bpr). Broadly, the prudential rules cover risk manage - ment, capital requirements and liquidity require - ments for Dutch-licensed banks and branches of banks with a registered office in a non-member state conducting business in the Netherlands. The prudential rules of CRR and CRD IV are the European implementation of the international Basel III standards (Basel III). Basel III is an international regulatory framework that aims to strengthen the regulation, supervision and risk management of the banking sector. The final texts of CRR3 and CRD VI were adopt - ed in June 2024. From January 2025, most of the CRR3 provisions will start to apply in the Nether - lands. CRD VI has to be implemented into Dutch law and will be applicable from January 2026. Accordingly, this chapter takes into account the 2025 regime covering CRR3 changes and the rules that are (still) applying under CRD IV. Risk Management Dutch-licensed banks are required to have sound risk management policies to control rel - evant risks. Relevant risks at least include con - centration risks, credit risks, counterparty risks, liquidity risks, market risks, operational risks, ESG risks, interest rate risks from non-trading activities, rest risks, risks due to excessive lever - age, securitisation risks, insurance risks, lapse
risk and risks arising from the macroeconomic environment in which the bank operates and which are related to the state of the business cycle. Risk management policies must be translated into specific procedures and measures to con - trol the relevant risks and must be integrated into the business processes of the bank. The proce - dures and measures must consist of, inter alia, authorisation procedures, limit settings and limit monitoring tailored to the bank’s nature, size, risk profile and complexity. Dutch-licensed banks must have an independ - ent risk management function. This function is tasked with the systematic and independent conduct of risk management, aimed at identify - ing, measuring and evaluating the risks the bank are exposed to. The management board and the supervisory board must be actively involved in a bank’s risk management. The ESG risk framework of banks must be fur - ther enhanced when CRD VI enters into force in 2026. Capital Requirements To ensure financial stability and mitigate risks, banks are subject to two distinct regulatory measures: capital requirements and liquidity requirements. The first set of measures follows from the CRR, and aims to establish minimum capital requirements for credit, market, and operational risks, ESG risks and other rele - vant risks. This requires banks to maintain an adequate capital buffer to absorb unexpected financial setbacks. Capital requirements can be divided into (i) qualitative; and (ii) quantitative requirements.
410 CHAMBERS.COM
Powered by FlippingBook