1. The future of financial supervisors Prof. Arnold Schilder De Nederlandsche Bank Nauta Dutilh Seminar Noordwijk, 14 October 2004 1

2. Introduction According to the IMF, Dutch financial sector supervision is well-designed, well-tailored, of high quality and an example to other countries. So leave it as it is? Economic, social and financial sector developments move rapidly; supervisors must keep pace. The future for DNB/PVK: merger completed by 1 November; major internal overhaul and 10% structural cost cuts. Four core values were formulated as part of the reorganisa- tion: openness, willingness to change, responsibility en co- operation 2

3. Openness Debate on quality and intensity of supervision held increasingly on the public level. Examples:  this conference  debate on administrative burden of supervision  Court of Audit report on AFM’s supervision of the securities trade  debate in Parliament on pensions supervision Public debates demand public accountability. Examples of this in DNB’s Annual Account:  explicit mention of enforcement measures (e.g. silent receiver)  investment policy  corporate governance DNB to be more emphatic in inviting opinions on its performance. “Making supervision future-proof” through regular external assessments. 3

4. Willingness to change Adequate Supervision Project to reassess our long-term strategy:  what is good work, and what makes it good enough?  is there room for change, reduction, improvement?  is supervision offering the guarantees expected by society?  30% reduction of regular supervisory reporting requirements Changes in prudential supervision to create risk profile-based buffers:  banks & securities firms: Basle II  insurers: Solvency II  pension funds and insurers: Financial Assessment Framework Common features:  new standards for buffers coupled with room for institutions’ own risk management and risk assessment methods  extensive public communication on the sea change in supervision 4

5. Responsibility Internal  room for individual responsibility within clear objectives and frameworks  performance management including balance score cards and variable bonuses External  appeal to institutions’ own responsibilities  requires strict assessment of executive and supervisory board members  who must be able to deal with complex risk models, financial reporting standards, anti- terrorist and anti-tax dodging measures  enforcement policy aimed at institutions’ own repsonsibility: a stiff warning first, formal measures if necessary Society at large:  calls for expansion of supervisory powers in reaction to confidence shock, but also:  calls for reduction of the supervisory burden  public confidence crucially important for social stability... ...with everyone’s own responsibility as a key ordering principle 5

6. Co-operation Within post-merger DNB Synergy and breadth of vision may offer added value in achieving five broad public effects:  financial stability  monetary stability  sound and well-behaved financial institutions  sophisticated payment systems  a substantive debate on economic policy with the financial sector Statutory supervision evolved from the need to intervene, but DNB is fully committed to consultations with (representatives of) the industry, today and into the future With foreign supervisors  financial institutions benefit from consolidated-level supervision  more prominent role for home country supervisor  international consultations between supervisors & amended legislation 6

7. Conclusion Openness, willingness to change, responsibility, co-operation: the core values of post-merger DNB... set to exert major influence on the future of DNB... in the interest both of the financial sector and of society at large 7