Dutch central bank has no new stress test plans for non-banks

© Reuters

By Yoruk Bahceli

AMSTERDAM (Reuters) -The Dutch central bank (DNB) has no new plans to stress test non-bank financial institutions for liquidity but a financial stability committee will discuss liquidity risks in more detail at a future meeting, spokespeople told Reuters.

The Bank of England said on Tuesday it would stress test non-bank financial institutions such as investment funds for the first time next year, to apply lessons from the near-meltdown in Britain's pension fund sector following a budget announcement in September that sent asset prices tumbling.

"DNB has no plans for new initiatives with regard to liquidity stress-test non-bank financial institutions," a central bank spokesperson said.

As part of the central bank's regular supervision, pension funds are required to control liquidity risks adequately and report regularly on the impact of shocks in interest rates and currencies on their liquidity risks, the spokesperson added.

However, a financial stability committee is monitoring developments closely and will discuss liquidity risks for investors in more detail at a future meeting, a spokesperson for the Dutch financial markets regulator AFM told Reuters.

In addition to the regulator, the committee also includes the central bank, the ministry of finance and the government's policy analysis agency.

The Netherlands' $2 trillion pension fund industry is home to the largest volume of assets in the European Union, according to the Organisation for Economic Co-operation and Development.

While Dutch pension funds also interest rate similar to those that threatened to overwhelm British pension funds in late September and early October, authorities say the Netherlands faces less risk as funds make less use of those derivatives and benefit from the larger and more liquid eurozone government bond market.

The DNB called on Dutch pension funds in October to review their readiness to weather a sudden spike in interest rates, following the turmoil in Britain.

The European Central Bank has jacked up rates by 200 basis points since July and is expected to tighten by a further 50 bps on Thursday.