“The Resilience of the Dutch Economy and Financial System: Insights from CPB’s Risk Reporting Financial Markets”

The chance of a slight economic recession in the near future has increased, but this does not pose a threat to financial stability. The financial position of the majority of households, businesses and banks is in good order, according to the Central Planning Bureau (CPB) in the annual Risk Reporting Financial Markets.

“The danger of a banking crisis in the Netherlands seems limited and the financial risks from the housing market are also manageable,” says CPB director Pieter Hasekamp.

The Dutch economy and financial system have had to put up with a lot in recent years, from Brexit and the corona crisis to the war in Ukraine and the energy crisis, but it has managed to absorb it all well, partly due to the support policy of governments and central banks .

“The necessary reduction of this support, at a time when there is still a lot of economic uncertainty, does entail risks, but the financial sector is sufficiently resilient,” says Hasekamp.

Resilience has even increased in recent years, keeping the risks of financial instability as a result of high inflation and interest rates and falling house prices under control.

Households and financial institutions have become more resilient to shocks from the housing market over the past decade. A turnaround is visible in the housing market due to high mortgage interest rates and falling house prices. But the homeowners run only limited risks. “On average, the financial position of homeowners has improved,” writes the CPB. “Living costs and debt ratios have fallen and financial buffers have increased.”

This improvement also applies to vulnerable groups of homeowners such as first-time buyers, young people and homeowners with little capital, but it is less strong. “These groups are less able to absorb shocks due to increased costs, increased interest rates, lower incomes or falling house prices.”

Banks are also more resistant to shocks in the housing market due to stricter regulations, larger buffers and a better spread of mortgages among non-banks, such as insurers and pension funds.

In the United States, several banks have run into financial problems in recent months as a result of rising interest rates and the large share of uninsured deposits.

According to the CPB, Dutch banks are in a better position and are more resilient due to stricter regulation, higher buffers, better hedging of interest rate risks and fewer uninsured deposits.