The Dutch financial sector is healthy and can absorb future shocks. That is the central message of the annual financial market risk report of the Central Planning Bureau.
There are risks, including war in Ukraine and rising prices, the researchers conclude, but Dutch banks are resilient. However, problems can arise if multiple shocks amplify each other.
The financial sector has come out of the corona crisis well and the reserves of banks are high enough to take the risks. Some of the risks identified by the researchers are related to the war in Ukraine. High energy prices, for example. Some eurozone countries could be hit harder because they rely more on imported energy. This could also have consequences for the Netherlands because of the trade relations with these countries.
Earn more with credits
Inflation can also make households and businesses less able to pay off their debts. Interest rates also rise, which can increase costs. If the loans cannot be repaid, the banks make a loss. At the same time, higher interest rates can also benefit the financial sector as it allows more money to be made on loans.
A rising interest rate is a disadvantage for the Dutch government debt, because the government spends more on interest payments as a result. Southern European countries have a much higher debt than the Netherlands and the high interest rates are a particular problem for these countries. The risk of a European debt crisis is always present, according to the researchers, because banks are interconnected.
They refer to the (imminent) bankruptcy of subsidiaries of Russian banks. At the end of April, for example, the Amsterdam Handelsbank went bankrupt in the Netherlands after the sanctions against Moscow. According to the Central Planning Bureau, the risks to the European financial system are not as great as these banks are small and most savings are guaranteed by the deposit guarantee scheme.
Submarine
Researchers also see the risk of a possible recovery in the housing market. House prices have risen sharply in recent years and if they fall, some households could be financially flooded. Researchers do not expect large losses for financial institutions, because people pay off their mortgages relatively faithfully, and banks therefore have significant reserves.
Corona remains a risk, as it is unclear whether the virus will actually pass or return. Moreover, it is now leading to lockdowns in China because of the zero covid policy there. The direct consequences for the Netherlands are limited, but as with the war in Ukraine, the Netherlands may be indirectly affected by its trade relations with the rest of the world.
Source: NOS
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