De Nederlandsche Bank (DNB) and the Netherlands Authority for the Financial Markets (AFM) have been told to “intensify their collaboration on data sharing” to enhance their supervision activities, the International Monetary Fund (IMF) has said.

The Netherlands: Financial System Stability Assessment by the IMF said that, going forward, “supervision must reflect a changing risk environment, basing decisions on robust and high-quality data”.

“DNB and the AFM should further intensify their collaboration on data sharing. It is critical to have the ability to collect granular data necessary for supervision – including on conduct – and to apply advanced technologies connecting data from different sources for the analysis. A data quality assurance process should prioritise data items needed for systemic risk analysis,” its report stated.

On pension funds, the IMF said their dependence on repo markets call for close monitoring and further engagement with financial institutions. Therefore, it made the monitoring of pension funds’ repo transactions one of its recommendations to DNB, as well as amending supervisory reporting where necessary, and performing liquidity stress tests which incorporate a drying-up of repo markets.

Despite this, however, the IMF said pension funds appear resilient to liquidity risks from margin calls even when access to the repo market is restricted.

Furthermore, regarding the transition of the Dutch pension system from a DB to a DC-style system, the IMF stressed that it will be “essential to closely monitor and proactively manage potential risks for the authorities related to resources and legal risks”.

While the IMF noted that DNB and AFM have “prepared intensely” for the transition, and a monitoring framework has been set up by the Ministry of Social Affairs and Employment, public communication by DNB and the AFM needs to be fully aligned during the transition phase, to reduce uncertainties and to minimise legal risk.

“Emphasising the important role of pension funds’ internal control functions will be key, as well as utilising high-quality data by the social partners to make transition decisions,” the report stated.

---