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The Netherlands’ banking sector: Facts & Figures

The Dutch economy is showing a robust level of growth. The increase in GDP is driven by a strong rise in exports and consumption. The expansion of world trade appears to be gaining traction. That is good news for Dutch exports. Higher consumer spending is attributable to improved disposable income, alongside a strong uplift in consumer confidence. A growth of 2.1% for this year and 1.8% for 2018 is expected.

The Dutch housing market is performing well after a prolonged slump. House sales improved markedly, as well as housing prices due to relative low interest rates on mortgages and higher employment rates.

The strong economy means that more jobs are created and unemployment was down to 6% in 2016. Government finance has improved markedly. Last year, the deficit turned into a surplus of 0.4% of GDP, with a further rise on the cards this year. Inflation is rising, but still modestly.

The Dutch banking sector is characterised by its relatively large part of the GDP, high level of concentration and the dominance of a few players. Nonetheless, Dutch banking has shrunk considerably in the past years. The ratio of banking assets to the GDP of the Netherlands has decreased from 600% in 2008 to 365% in 2016.

The Dutch market is competitive and barriers to entry are low due to the well-developed financial infrastructure. Mortgage lenders coming from abroad can easily make use of a network of financial brokers. The largest institutions in Dutch banking industry are internationally focused due to the open, export-oriented, Dutch economy.

A large consolidation phase has taken place since the nineties owing to mergers and consolidation as a result of the financial crisis. The Dutch banking sector is now dominated by a small number of very large institutions enjoying large market shares. Overall, banking has become more focused on the domestic retail market.

The ownership of the largest banks is mixed: one bank is publicly listed, some are (partially) owned by the national government and one is a large cooperative institution.

Foreign banks are entering the Dutch market, but their presence is relatively small compared to other European markets.

Since 2010, the number of debit card transactions has risen by more than 60% to 3.6 billion transactions in 2016. This high growth is due to the substitution of cash payments by debit card payments, especially when paying small amounts. By the end of 2016, approximately a quarter of debit card payments were initiated contactlessly via debit card or smartphone (almost five times as much as in 2015).

Mid-2016, 99.63% of Dutch residents had access to an ATM within a five-kilometre radius.

In the Netherlands, the total damage due to fraud in payments has fallen steadily from €81.8 million in 2012 to €10.2 million in 2016.

Dutch consumers usually use computers, tablets or smart phones to transfer money. In 2016, 91% of the Dutch used online banking and 54% a mobile banking app. Banks are incorporating and investing in fintechs to provide their customers with new technological insights and agility.

Bank financing is important for Dutch companies. Over the past years, the total amount of lending to small and medium-sized enterprises (SMEs) has slightly declined. This was due to lower risk acceptance by the banks compared to the pre-crisis period, low demand (investments by SMEs are only slowly picking up after the crisis), the fact that, on average, SMEs in the Netherlands have built up substantial equity and are therefore in less need of bank debt and a high level of repayments. Nevertheless, at 28%, total bank lending, expressed as a percentage of GDP in the Netherlands, is among the highest in Europe.

The use of alternative financing like crowdfunding and credit unions remains relatively low. Dutch banks have supported efforts to address climate change, for example by supporting companies in energy efficiency and sustainable energy with reduced interest rates, expanded credit facilities or specialised services. The total value of Green Bonds issued by Dutch banks grew to over 6 billion euro.

The five largest banks in the Netherlands have a combined share of about 85% of total banking assets. Over 80% of Dutch consumers have their savings in deposits at one of the five largest banks. These banks have a comparably high share in the mortgage market. Margins on mortgage lending decreased in 2016.

The sound stress test results as published by the European Banking Authority in July 2016 confirm the strong capital position of the major Dutch banks. Also the International Monetary Fund (IMF) recently concluded that the Dutch financial system is resilient to shocks. The IMF analysts found the Dutch banking sector to be well-capitalised. On average, Tier 1 capital adequacy of Dutch banks increased in 2016 ahead of new Basel capital regulation rules. Profitability of Dutch banks is adequate due to low credit losses and a high performance ratio on mortgage payments. The prolonged period of low interest rates puts pressure on banking income. All in all, gross value added to the economy is 5.5% in 2015. Employment reduced by 5,000 full-time equivalents to around 70,000 in 2016.