1. 1 Household financial assets: how did they fare across the financial crisis? - The Netherlands Dirk van der Wal De Nederlandsche Bank, Statistics department Working Party on Financial Statistics – OECD, 30 November 2010

2. 2 Household (HH) financial assets in the Netherlands Aim: analysis of HH financial investments to better assess risks & vulnerabilities Focus: main financial assets Dutch HH: 1. savings, 2. securities, 3. claims on pensions/life insurance How did these assets developed during the financial crisis since 2007? Topics: - measurement of balance sheet items - analyse underlying macroeconomic factors - discuss the special situation of HH pension claims.

3. 3 DNB observes prominent financial assets at the source (Mfis, domestic custodians, pension funds) Financial components: input for NA/FA: NSI compiler Close cooperation CB-NSI In NA/FA source data are adjusted --> integration Differences relatively small : CB data reflect accuracy, NSI data reflect mutual consistency CB data also input for policy actions (timeliness) Household financial assets in the Netherlands

4. 4 Basic data: Total financial assets> 1.300 bln Twice Dutch GDP Net financial assets 700 bln 53.000 per citizen older than 18 yr Net financial worth grows since start crisis 2007 Q1: + 116 bln

5. 5 Main components financial balance sheet Dutch HH, 2010 Q2 In percent of total financial assets

6. 6 1. Savings deposits/GDP ratio, in per cent Savings deposits on a growing trend

7. 7 Savings deposits mix and rate differential Mix of savings varied strongly during crisis Households reacted on rate differentials Agreed maturity at top 40%, but now 12%

8. 8 2. Household equity holdings/GDP, in per cent 1) Holdings of quoted equity & mutual fund shares dropped sharply in 2007-2008

9. 9 Household equity holdings 1) highly correlated with stock market Value drop due to price losses: 11,1 bln ( 2% GDP) Also net equity sales: 9,9 bln Share of all securities fell from 10% to 7% of total assets

10. 10 3. Old age pensions in the Netherlands Dutch system consists of 3 pillars: * State / social security * Funded employer pension scheme * Funded individually arranged pensions Pillar 1+2 should result in pension 70% of wage Future pension rights are calculated using interest rate swap curve (supervisory requirement) Statistically, liabilities of pension funds are financial assets of households

11. 11 Net equity households in life & pensions/GDP Net equity/claims in life & pensions is increasing Dutch share in euro area almost 18%

12. 12 Why increase in net equity life/pensions? declining interest rates higher life expectancy Present value of future liabilities increases Pension funds should have more assets now because of the low return of current investments

13. 13 Do pension funds have enough assets now? Not to achieve fully inflation-proof pensions Interest rate decline caused liabilities to increase more (+15%) than assets (+7%) in 2008 Pension funds underestimated portfolio risks: shocks larger than in standard model As a result buffers and funding ratio declined:

14. 14 Net equity in pension funds – some qualifications, and conclusions Rise in banks savings and pension claims outweighted losses on equities during crisis Does higher net equity mean that HH became richer? Are you richer when you live longer? Households cannot take out their pensions (no free savings) Statistical measurement of future liabilities cannot predict whether pension funds will meet their obligations For a realistic view not focus only at HH balance sheet; also look at financial situation of agency that invests collective savings for retirement

15. 15 Household financial assets in the Netherlands