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Changes to rules on public warnings and publication of administrative sanctions

Proposed changes to the Dutch Financial Supervision Act broaden the publication powers of the supervisory authorities and potentially increase reputational risk for financial institutions as a result of breaches of regulation.

The proposed changes:

  • extend the powers of the supervisory authorities to issue public warnings;
  • enable the supervisory authorities to immediately issue a statement to respond to a statement made by a financial institution about a violation or proposed sanction; and
  • introduce a legal basis for the Dutch Central Bank to publish core data about banks on a periodic basis. 

These changes are contained in the Transparent Supervision of Financial Markets Bill and the accompanying explanatory memorandum, sent to the House of Representatives on 4 September 2017 (the Bill). The Bill provides for amendments to the Dutch Financial Supervision Act1 (FSA) to give the Netherlands Authority for the Financial Markets2 (AFM) and the Dutch Central Bank3 (DNB) broader powers to publish information regarding the supervision of financial institutions.

Public warnings or public statements

The FSA currently contains rules for publishing a limited group of violations in the form of a neutral public statement or a public warning. The rules mention these two forms of publication, but do not distinguish between the two. They can be used in the same instances and under the same conditions. The Bill distinguishes between the two. It mentions a limited group of violations that the supervisory authorities can publish without further substantive conditions (public statement), and in addition, provides that all violations can be published if that is necessary to inform the public quickly and effectively in order to prevent damage (public warning).

Additional exception to mandatory publication of administrative sanctions

The FSA currently contains a number of exceptions to the obligation to publish administrative sanctions. The Bill is to add an exception in order to clarify that the supervisory authorities are not required to publish administrative sanctions if this would be contrary to the primary object of the sanction. The intention is to prevent DNB from being forced to publish prudential measures aimed at reinforcing the violator's soundness, if publication would actually put that soundness at risk.

Procedural provisions and legal remedies

The Bill clarifies the procedural rules. The publication of data that can be traced back to an individual person must be preceded by a formal decision issued to relevant parties. This decision must contain sufficient information for interested parties to be able to decide whether they wish to challenge the decision. If there is a court challenge, no public statement can be made until a final court decision has been issued. 

Urgent situations

The supervisory authority may shorten the notification period in urgent situations:

  • no further postponement is possible in view of the interests that the FSA intends to protect; or
  • the party concerned itself discloses information about the violation or the decision to impose a sanction and it is necessary to accelerate publication in the public interest to protect the confidence in the supervision of the financial markets.

Publication of aggregated core data about banks

Lastly, the Bill introduces a legal basis for DNB to publish aggregated core data about banks on a periodic basis. The data to be published, including the leverage ratio, will be designated by General Administrative Order. DNB will publish a total overview that contains both data that banks publish based on the Capital Requirements Regulation (CRR) and data that they must publish by virtue of accounting and reporting rules.

Footnotes

1. Wet op het financieel toezicht
2. Autoriteit Financiële Markten
3. De Nederlandsche Bank

Further information

This case summary is part of the Allen & Overy Legal & Regulatory Risk Note, a quarterly publication.  For more information please contact Karen Birch – karen.birch@allenovery.com, or tel +44 20 3088 3710.

Legal and Regulatory Risk Note
Europe