liquid character to a number of capital market
instruments, and secondly because, in so open a
financial market, the introduction of
instruments such as Commercial Paper and
floating rate notes has made the central bank's
money supply control policy more difficult to
implement. Steps will have to be taken to ensure
that any restrictive measures do not bear too
heavily on loans provided by the banks, the
more so in view of the fairly low rate of growth
in this sector.
that the calendar has been abolished, that the
20% limit on the portion of any public market
loan which may be taken over by foreign co-
managers no longer applies and that the lead-
management can be undertaken by a foreign
bank with a branch in the Netherlands, provid
ed that a reciprocal arrangement exists with the
country concerned and that the bank is properly
equipped for issues in the Netherlands.
Another consequence of the liberalization was
the commencement, in the current financial
year, of the issue of Commercial Paper and
Certificates of Deposit. The ABN was the first
Dutch bank to operate in these two markets.
It goes without saying that we fully support the
aim of these measures, namely the strengthening
of Amsterdam's position as a financial centre.
However, we have some doubt as to whether the
goal can be attained unless a number of other
restrictions, notably the tax on stock exchange
dealings, are removed. Nor are we entirely
happy about the term "reciprocity", which in
our view must be interpreted as meaning that
foreign banks may operate in the issues market
in the Netherlands only if Dutch banks have
unfettered access to the issues markets in their
countries.
Finally, we are moved to wonder what effect the
changes will have on the monetary policy of the
Nederlandsche Bank. The liberalization of the
capital market has, of course, made it more
difficult to control the money supply. Firstly,
because the blurring of the distinction between
I he money and capital markets may impart a
The principal change in the area of prudential
control in 1985 concerned the introduction of
solvency criteria for the new types of latent
credit already mentioned, e.g. NIFs and RUFs,
which do not appear as such in the balance
sheet. This step is in line with the measures
adopted in other countries and may be viewed as
a reaction to the risks involved. The solvency
rate applying to these instruments is half of that
for "normal" credits. Moreover, as part of the
solvency requirements, the central bank laid
down specific rules for options and futures; these
apply with effect from 1 January 1986.
The year under review saw the start of
negotiations on proposed changes to the
structural policy, to take effect on 1 January
1987. As things now stand, a major step in the
direction of deregulation may be anticipated. We
agree in principle with the proposal to abolish
that section of the policy which regulates the
issue of bond-linked paper, including "bank-
brieven". The part of the policy which is
aimed at preventing the intertwining of the
banking and insurance branches, however, is a
very different matter. In view of their disparate
The Nederlandsche Bank: liberalization of the capital market.
jiiiiii»"
Nieuw Amsterdam, a prestige
office complex in the South-
Ëast District of Amsterdam.
The ABN and the insurance
group Nationale Nederlanden
each have a 50% interest in this
development.
