Dutch Banks Warn of Higher Leverage Ratios Without Europe

Dutch bankers including ING Groep NV (INGA) Chief Executive Officer Ralph Hamers warned the Netherlands against raising capital requirements without waiting for a European-wide agreement.

“There is a group of people calling for further tightening of rules, if needed ahead of developments in Europe. I understand the worries underlying this, yet a lot has happened since 2008” to make banks safer, Hamers, who has led the biggest Dutch financial-services company since October, told lawmakers in The Hague today. “It’s important to get a European framework in line with the international interrelatedness of the financial industry.”

The assets of the Dutch finance industry are more than four times the nation’s gross domestic product, with the four biggest lenders accounting for almost 80 percent of that. Jeroen Dijsselbloem, since becoming finance minister a year ago, has moved to cap bankers’ pay and improve buffers to limit risks stemming from the size and concentration of lenders.

Banks considered too big to fail should seek a ratio of capital to assets, or leverage ratio, of at least 4 percent, he said in August. That exceeds the 3 percent threshold proposed by the Basel Committee on Banking Supervision for 2018. While favoring European-wide implementation, Dijsselbloem wants to pursue the higher leverage ratio unilaterally in case governments can’t agree. Some lawmakers and academics want an even higher threshold.

Leverage Ratios

An increase of the leverage ratio to at least 5 percent would mean Dutch banks would have to add 20 billion euros ($27 billion) in capital, which would have a large impact on both lenders and the economy, said ING’s Hamers, 47.

Dutch Banking Association Chairman Chris Buijink today also called for European-wide rules, with leverage ratios as a backstop on top of risk-weighted capital demands. Lenders in the Netherlands increased their common equity Tier 1 ratio, which takes into account risks for specific assets, to 11.5 percent at the end of 2012. That compares with a leverage ratio of 3.4 percent, according to Dutch central bank data.

Banks including Rabobank Groep, ING and ABN Amro Group NV, have a relatively high amount of assets considered low risk, including 592 billion euros in residential mortgages and 479 billion euros in loans to government-related institutions, Buijink said. Focusing only on leverage ratios would put Dutch banks at a disadvantage, he said.

The Netherlands provided more than 95 billion euros for rescues of financial companies since 2008, including guarantees and capital injections for ING, ABN Amro and Aegon NV. In February, it spent 3.7 billion euros to nationalize SNS Reaal NV, the fourth-biggest bank, after real estate losses brought it to the brink of collapse.

To contact the reporters on this story: Maud van Gaal in Amsterdam at mvangaal@bloomberg.net; Corina Ruhe in Amsterdam at cruhe@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.