NETHERLANDS Law and Practice Contributed by: Johannes de Jong and Juliet de Graaf, Osborne Clarke N.V.
Liquidity requirements Besides the capital requirements, Dutch- licensed banks must adhere to liquidity require - ments. These requirements are designed to guarantee that Dutch-licensed banks maintain an adequate amount of liquid assets to fulfil their short-term obligations, particularly in times of financial strain. The CRR outlines two primary liquidity requirements: the liquidity coverage ratio and the stable funding ratio. The liquidity coverage ratio focuses on short- term liquidity risks and requires banks to hold sufficient liquid assets to be able to convert these assets into cash under stressed conditions over a thirty-day period. The stable funding ratio, on the other hand, focuses on the long-term liquidity risks and requires banks to ensure that their long-term obligations are met with diverse stable funding instruments. 8. Insolvency, Recovery and Resolution 8.1 Legal and Regulatory Framework The key piece of legislation around insolvency, recovery and resolution of banks is the Bank Recovery and Resolution Directive (BRRD). BRRD is implemented in Part 3A of the DFSA. The BRRD serves the purpose of ensuring the continuity of a bank’s critical financial and eco - nomic function, while minimising the impact of a bank’s failure on the economy and financial system. To that effect, the BRRD provides the national resolution authorities (the DNB in the Netherlands) with a set of tools to intervene suf - ficiently early and quickly in an unsound or failing bank.
The BRRD distinguished three phases with regard to recovery and resolution: • recovery and resolution planning (Title II BRRD); • early intervention for recovery (Title III BRRD); and • resolution (Title IV BRRD). Phase 1: Recovery and Resolution Planning Dutch-licensed banks must establish a recovery plan. The recovery plan must include a frame - work of qualitative and quantitative indicators identifying the points at which escalation pro - cesses/action plans must be activated. The EBA has issued guidelines on the minimum indicators that banks must include in their recovery plan (EBA Guidelines on recovery plan indicators). With a view to proportionality, the DNB has the option to simplify these recovery plan require - ments for certain less significant institutions (LSIs). The DNB, as the resolution authority in the Neth - erlands, must establish a recovery plan for each licensed bank. The recovery plan will be based on information to be provided by the respective bank. Recovery and resolution plans must be updated at least annually. Phase 2: Early Intervention for Recovery If the financial condition of a bank is rapidly dete - riorating (as further set out in the EBA Guidelines on early intervention triggers), the BRRD confers a number of powers on the DNB to intervene. These powers include: • convening (with or without management co- operation) a meeting of shareholders of the
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