Regulation and policy in the Netherlands for financial institutions; a disadvantage?

The financial crisis in the first decade of this century revealed not only the important vulnerabilities in the financial system but also the shortcomings of the then prevailing regulation. As banks and insurers were severely challenged or, in the worst case, failed during the global financial crisis, policymakers felt an increased need to adapt or implement regulation in order to prevent a new crisis.

International cooperation and alignment is an important way to prevent the circumvention of rules via international regulatory arbitrage. A global agreement was reached regarding the rules for capital and liquidity requirements for banks (Basel III). For other types of regulation, such as rules governing the remunerations, agreements between EU countries proved feasible, yet global agreements could not be achieved. Some EU countries, including the Netherlands, also introduced national laws.

In the Dutch media it has been frequently suggested that financial regulation in the Netherlands is stricter than the regulation in other countries and that this relative strictness is leading to: a) an exit of financial institutions from the Netherlands b) the Netherlands becoming less attractive for entry and c) unfair competition for Dutch financial institutions.

In this study we evaluate these assumptions.