COLUMN SYLVESTER EIJFFINGER
Hoogleraar Financiële Economie
Financials and soft skills
Law is everywhere and everyone has to deal
with it in daily life. However, maybe you have
not always been aware of this. Even a simple
transaction like buying bread is governed by
different regimes of contract law, commercial
law and liability law. The meaning of law in
contemporary society cannot be underestimated. Law regulates most social aspects and
influences virtually all transactions. Many laws
customer, which should be the main focus of
will be more closely involved in financial insti-
were adopted during the last few decades.
bank’s business.
tutions and will know exactly what happens
More procedures in conflicts between people
An important statement, but why did the AFM
inside. The prudential supervisor has to focus
are conducted. We can speak of a legalization
not warn about misconduct sooner? The argu-
rather on a principle-based than on a rule-
of society. The role of government in society
ment that they have only be allowed to call
based supervision. Financial institutions should
is growing, including the enforcement of the
names since 2007 and that, in combination with
not be tested only formally, that is if they have
rule of law. In these turbulent times it seems
a fine, after ample research, meaning they could
a risk management model and formalize their
more than necessary that politics has taken
only fine DSB in the recent summer does not
risk management according to certain proce-
more control than in normal times.
hold. It seems that the AFM did not make use
dures. The supervision of DNB has become too
of its existing competences in the last couple
formalistic and legalistic, because of the legaliza-
However, with the legalization of society, bank-
of years. Therefore, its plea for more preventive
tion of society and possible liability suits. DNB
ing supervision threatens to rely too much on
instruments seems to be inappropriate. Further-
should rather focus particularly on the behav-
rules instead of on behaviour of bankers. The
more, it is unfortunate that the AFM lumps all
ioral aspects of bankers, the so-called ‘soft skills’.
failure of DSB Bank has shown that banking
banks together. That undermines trust in the
The financial world innovates very quickly,
supervision needs to change.
banking sector and creates an atmosphere of
implying that the supervisor has to be very
There has been silence after the media storm
suspicion against those banks that are fighting
good informed about the developments in
around the failure of DSB. An independent
to function flawlessly.
the financial industry. And especially now, this
research committee, led by Michel Scheltema,
Besides the AFM, we need to throw more light
is urgent, when we need financials institutions
started in November to check, among others,
on why and on what terms DNB as a prudential
that are aware of their role in society. Financials
whether the Autoriteit Financiële Markten (AFM)
supervisor decided to grant a banking license
should not only be driven by shareholder value,
has failed as a supervisor of the conduct of busi-
to DSB four yours ago. Maybe, because they
but also by the interests of their other stakehold-
ness and/or De Nederlandsche Bank (DNB) as
hoped DSB would shake up the Dutch bank-
ers (customers, savers and the society at large).
a prudential supervisor for safeguarding the
ing landscape thoroughly. With the benefit of
To come to a really sustainable banking sector
liquidity and solvency of financial institutions. It
hindsight we know now that DNB has not set
supervision focused on ‘soft skills’ of bankers,
can be argued, that both supervisors could have
conditions severe enough for the integrity and
together with the check of the formal criteria, is
played this role better.
expertise of the members of the executive and
the secret weapon for a long term sound finan-
Concerning AFM, in an interview in Het Finan-
supervisory board of DSB Bank. In the future, this
cial sector.
ciëele Dagblad (November 10th, 2009) one of
can be done more completely and thoroughly.
its directors, Theodor Kockelkoren, pleads for
After all, since January 1st, 2010 with the com-
more legal authority to verify the development
mencement of the Code Banking, DNB has
of financial products of banks and insurers. They
been allowed to test not only their integrity, but
still make their customers believe the moon is
also the expertise of executive and supervisory
Sylvester Eijffinger
made of cream, according to Kockelkoren. The
board members.
in collaboration with Annemarie Hinten-Nooijen
banks often still do not act in the interest of their
Supervision may also be improved when DNB
(Centre for Science and Values)
Asset Magazine
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