Trending: EU Harmonisation in the Dutch Financial Regulatory Landscape 2018/19

Bart Bierman, Finnius

In this article, Bart Bierman at Finnius explores the evolving nature of the Dutch regulatory landscape across the financial sector and the shift towards harmonisation with EU legislation.


After the 2008–2013 financial crisis, EU and – in its slipstream – Dutch regulatory laws have seen a historic overhaul unlike anything seen before. This has led to Dutch financial institutions being subject to an extremely detailed and opaque set of regulatory requirements, and thus a significant increase in regulatory compliance costs. The current framework is expansive and expensive. Slowly, however, over the past two years, this crisis prevention legislation has seemed to reach its final stages. 

Until recently, the Dutch legislator has proven very critical of the banking sector. This resulted in some gold-plating rules above and beyond EU banking legislation. As an example, in the past few years, there has been a Dutch focus on stricter inducement, remuneration and ethical conduct regulations. For instance, the Netherlands introduced a 20 per cent bonus cap applicable to all employees of all types of Dutch financial institution. This created a significantly lower and broader cap than the EU’s, which stands at 100 per cent/200 per cent for banks and investment firms only.

However, the typical Dutch legislative regulatory rigidity seems to have halted to a large extent, possibly under the prospect of attracting banks to the Netherlands after Brexit. Also, a similar ease on legislative measures is noticeable on an EU level. In times of economic prosperity and technological innovation, and with the crises being further behind us, the nature of legislation is shifting. In fact, EU regulatory legislation is gaining in importance over Dutch regulations as a result of far-reaching harmonisation. Below, we will discuss the financial regulatory trend towards EU harmonisation that we will see in the Netherlands – and thus in other EU member states – over the years to come.


General outlook

A quick glance into our regulatory crystal ball gives us the following insights. For 2018 and 2019, we expect financial regulation and the supervisory authorities to be as strict as in the post-crisis years. We also predict a change in focus: from crisis prevention to market regulation, and from one-size-fits-all frameworks to a more proportional set of rules. Regulators will seek to adapt to new technologies and their inherent risks. Legislation will cater for a more international world and contain detailed third-country regimes. And last but not least, the construction of the financial regulatory framework will occur amid a rapidly increasing trend for EU harmonisation – while one major member state is drifting away, as a result of Brexit.

Below, we expand on these predictions concerning the influence of EU regulatory law in the Netherlands.

Full EU harmonisation

Single rulebook

Dutch banking regulation is mainly EU-driven. After the credit crisis and the euro crisis, the EU found that the effects of a failing bank could not be contained within national borders. Also, national EU member states and their local banks held each other in a stronghold. Banks own a significant amount of sovereign debt on their balance sheet, while national governments would have to bail out these banks if they were to fail, resulting in a vicious cycle.

As a result, at an EU level there is a strong preference for one single harmonised set of bank regulatory rules and methodologies. Those harmonised rules are laid down in the Single Rulebook. In order to achieve direct applicability in all EU member states, the EU is increasingly using directly applicable regulations and guidelines. By now, it is not only the bank capital rules (the Capital Requirements Directive (CRD IV) framework) that are laid down in mostly directly applicable EU regulations and guidelines. The same also applies to other recent EU legislative frameworks, such as:

  • the investment services rules (the EU Markets in Financial Instruments Directive (MiFID II) framework);
  • capital markets rules (Market Abuse Regulation (MAR) and the European Market Infrastructure Regulation (EMIR)); and
  • payment services rules (the Payment Services Directive (PSD II) framework), to a lesser extent.

These are shaped in such a manner that most requirements do not need local implementation. We expect this trend to continue and increase in the coming years.

The Single Rulebook is mostly drafted by the European supervisory authorities (ESAs), which are: the European Securities and Markets Authority (ESMA); the European Banking Authority (EBA); and the European Insurance and Occupational Pensions Authority (EIOPA). The ESAs are also the watchdogs for harmonisation across the EU. In the Netherlands, for instance, this has resulted in the EBA requiring the Dutch Central Bank (DNB) to cease its own Dutch prudential regime for proprietary trading firms that the EBA has deemed to be not in line with the single rulebook (ie, the directly applicable EU Capital Requirements Regulation).

These regulating powers of the ESAs over the national competent authorities and their supervisory methodologies will only increase. On 20 September 2017, the European Commission (EC) published proposals providing the ESAs coordination powers over day-to-day supervision by competent authorities. The ESAs will set, for instance, EU-wide priorities for supervision in Strategic Supervisory Plans, against which competent authorities would be assessed. Competent authorities will be required to draw up annual work programmes in line with the Strategic Supervisory Plan. We expect these proposals to be adopted by the Council and the European Parliament within the next two years.

EU Banking Union

From an institutional perspective, there is a trend for full harmonisation. As of 4 November 2014, the EU Banking Union is in force. Under the Banking Union, the European Central Bank (ECB) is the prudential supervisory authority of all banks with a seat within the eurozone. This has changed the role of DNB significantly. The ECB now conducts direct prudential supervision with regard to significant Dutch banks. With regard to the other, less significant, Dutch banks, DNB remains the direct prudential supervisory authority. However, the ECB will indirectly be of great influence due to the authorisation to adopt further regulations, guidelines, recommendations and decisions, which have to be followed by DNB. In addition, the ECB decides on approvals for banking licences and declarations of no-objection (regardless of whether the relevant bank is significant or not).

This direct influence of the ECB on less significant banks is only increasing, in our view to the point that national bank supervisors (such as DNB) can no longer determine their own supervisory methodologies and practices. In a sense, this is the phase of the perfection of the EU Banking Union. The role of the national competent banking authorities will thus be marginalised.

EU Capital Markets Union

The EU is striving for full harmonisation in areas other than banking; it also applies to capital markets rules. Between 2015 and 2017, the EU proposed a number of rules that together should create the Capital Markets Union (CMU). With the CMU, the EC is trying to stimulate the economic growth potential of Europe by strengthening and diversifying financing sources for European companies and long-term investment projects. The subsequent CMU proposals cover a broad area of financing-related topics.

In addition to the proposed material rules and regulations, the EC is proposing to further strengthen and integrate EU financial markets supervision. This includes, for instance, new direct formal supervisory powers for ESMA, taking away certain powers from the national competent authorities. Some of the powers EC proposes to entrust to ESMA relate to:

  • Market abuse: ESMA will have the right to act in specific cases, which have cross-border implications for the integrity of financial markets or financial stability in the EU. ESMA will also be able to require investigations.
  • Prospectuses: supervision of certain specific prospectuses (certain wholesale non-equity securities, asset-backed securities and specialist issuers) will be transferred to ESMA. These prospectuses have an important cross-border dimension and potential risks of supervisory arbitrage.
  • EuVECA, EuSEF and ELTIF funds: ESMA will directly supervise these funds. European venture capital funds (EuVECA), European social entrepreneurship funds (EuSEF) and European long-term investment funds (ELTIF) are collective investment funds with EU labels whose rules are harmonised at EU level.
  • Product intervention powers: These powers are set out in the directly applicable Markets in Financial Instruments

Regulation (MiFIR). They allow ESMA in certain cases to restrict or prohibit the marketing, sale or distribution of certain financial products or instruments.

We think it likely that ESMA will assume its first direct supervisory powers by the end of 2019.

Relevance of Dutch regulatory law

The EU is fully taking over the role of the Dutch legislator and supervisors in many important regulatory areas. However, there are still several areas where we expect a significant influence from Dutch national regulatory laws and practices over the next few years.

Firstly, EU directives still require implementation. Although national implementation must be interpreted in accordance with EU directives, in practice there is still plenty of room for the national legislator to implement in accordance with its own agenda. This is especially the case in the Netherlands, where EU directives are not implemented literally, but rather fitted into the Dutch regulatory system. Also, sometimes implementation does not occur before the requisite deadline. This was the case recently with the Fourth Anti-Money Laundering Directive and the Payment Services Directive II. As a result, for several months, the Netherlands will have a different regulatory regime from the EU member states that met the deadline.

Secondly, the Dutch legislator remains something of a frontrunner in terms of reacting to a crisis or national political priorities. For instance, since 2014, the Netherlands has been the only EU member state with a full regulatory licensing regime for cash-payment-processing institutions. Accordingly, the Dutch have implemented the BIS/IOSCO Principles for Financial Market Infrastructures for such institutions. Similar frontrunning has led to the Dutch 20 per cent bonus cap (described in the introduction), fit and proper tests for senior management, and even a “banker’s oath”.

Generally, the Dutch legislator tends to operate fast when it finds the EU too slow. For instance, in the past year it created a Dutch crowdfunding regime and implemented its own cybersecurity rules. Over the next year we expect Dutch rules in relation to, for instance, cryptocurrency offerings (initial coin offerings (ICOs)).

With so many supervisory powers being transferred from DNB to the ECB, DNB has fully taken up its role as the integrity supervisor. In the past year, as a result of the Panama Papers and the Paradise Papers; the global geopolitical situation; and the market access of new, often unregulated financial market players, the Dutch regulators are increasingly focusing on integrity of the banking sector. This includes a national tightening of supervision on rules concerning customer due diligence, anti-money laundering and sanctions. More specifically, we expect Dutch supervisors to employ a stricter and more detailed focus on tax planning via financial institutions in the country.

Thirdly, financial regulatory often has a link with national financial civil law rules. This is especially the case when it comes to investor protection, asset segregation, governance, disclosure requirements, contractual provisions, client documentation and corporate law. In spite of the trend for EU harmonisation, so far there is often no common ground in the EU for directly applicable civil law rules. For the next few years, we expect such civil law rules to require transposition into national law.

Finally, we expect a tendency for local supervisors to, whenever possible, interpret rules – even harmonised directly applicable rules – in their own manner. This is especially the case with the Dutch supervisory authorities, and is not always a bad thing. After all, they are closer to the Dutch financial institutions than their EU counterparts.


Where will Dutch regulatory rules be adopted in 2018 and 2019? In The Hague or in Brussels? Due to the EU harmonisation projects, we expect that the answer will increasingly be Brussels. However, as a frontrunning member state on regulatory areas, the Netherlands will – at least in the foreseeable future – continue to have its own specific national rules, procedures and interpretations.

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