Billions subsidy distorts Dutch banking sector

SOMO: The four largest Dutch banks receive an annual hidden subsidy "of between 4.1 and 12.3 billion euros. This is what they save on their financing because creditors assume that the Dutch banks, this will always save. An amount equal to two-thirds to almost double their profits in 2011. This is evident from the new study "The Financial Obesity in the Netherlands' SOMO.
 
It also shows that wages in the Dutch banking sector in recent years not only significantly increased more than in the rest of the Dutch economy, but also stronger than in the financial sectors in other developed countries. Since the crisis, much of bank profits have evaporated, these wages in the Netherlands hardly adjusted.
This large and expensive banking sector is a burden for the Dutch economy. There are important steps to put the banking sector to lose weight, but more is needed. The Wijffels Committee that the government next year will advise on the future of the banking sector, and therefore further unconventional measures immediately.

Hidden subsidy

The four largest Dutch banks can borrow money relatively cheap because financial markets expect the Dutch state them financial assistance will shoot if they get into trouble. That financial advantage from about one percentage point (ING and Rabobank) to more than two percentage points (ABN Amro Bank and SNS).


SOMO has the financial advantage that these banks yields calculated. This hidden subsidy "last year was between 4.1 and 12.3 billion euros. Either two-thirds to nearly twice the profit that these four banks in 2011 rapporteerden.Dit advantage enables them to more risk taking and market share to conquer because it gives them a competitive advantage over smaller banks and banks from countries with a less robust national economy.
 

Great risk to taxpayers

"The hidden subsidy is a measure of the distortion of the banking market because banks are too large or complex to fail would. SOMO's research in showing that the "too big to fail' problem, is undiminished. This despite the measures already taken. Indeed, the Dutch banking market since the crisis only further concentrated hit. The risk for the Dutch taxpayer is undiminished, "says SOMO researcher Rens van Tilburg.
 

High wages

The SOMO research also shows how wages in the banking sector have grown much stronger than in other sectors in the Netherlands and also stronger than in financial sectors in other Western countries. The difference in wages between the banking sector and the average in the Netherlands increased from 20% in early 90s to over 80% in 2007. Only in Iceland rose between 1999 and 2009, wages in the financial sector harder than in the Netherlands. Despite the fact that many of the supposed benefits of scale in the financial sector now prove to be an illusion, and even may have adverse effects, is within the sector itself held firmly to this view. The wages in the sector are hardly changed.
Economic research shows that banks with the size of the three largest Dutch banks especially diseconomies of scale give. It also shows a banking sector as a whole as great as that in the Netherlands the economy adversely.
 

Recommendations

SOMO concludes that the Dutch economy will benefit from a significant downsizing of its banks. SOMO makes the following recommendations to establish a banking sector with a healthy size:

• Bring the remuneration in the banking sector in line with what similar positions in other sectors is paid.
• Make banks attractive for long-term shareholders by means of a simple and stable business. And through defensive guard against hostile takeovers.
• Increase the diversity of the sector: Rather more than small banks ABN AMRO international activities again novo.
• Reduce the tax incentives for debt.
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