Household financial assets: how did they
fare across the financial crisis?
- The Netherlands
Dirk van der Wal
De Nederlandsche Bank, Statistics department
Working Party on Financial Statistics – OECD, 30 November 2010
1
Household (HH) financial assets in the Netherlands




Aim: analysis of HH financial investments to better
assess risks & vulnerabilities
Focus: main financial assets Dutch HH: 1. savings,
2. securities, 3. claims on pensions/life insurance
How did these assets developed during the financial
crisis since 2007?
Topics:
- measurement of balance sheet items
- analyse underlying macroeconomic factors
- discuss the special situation of HH pension claims.
2
Household financial assets in the Netherlands
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DNB observes prominent financial assets at the
source (Mfi’s, domestic custodians, pension funds)
Financial components: input for NA/FA: NSI
compiler
Close cooperation CB-NSI
In NA/FA source data are adjusted --> integration
Differences relatively small : CB data reflect
accuracy, NSI data reflect mutual consistency
CB data also input for policy actions (timeliness)
3
Household financial assets in the Netherlands
Basic data:
•
•
•
Total financial assets> € 1.300 bln
Twice Dutch GDP
Net financial assets € 700 bln
 € 53.000 per citizen older than 18 yr
Net financial worth grows
 since start crisis 2007 Q1: + € 116 bln
4
Main components financial balance sheet Dutch HH, 2010 Q2
In percent of total financial assets
Material asset
Financial liabilities
Financial assets
100%
Life
insurance
91%
80%
Net financial
assets
Owner
occupied
dwellings
Pensions
60%
40%
Mortgages
Securities
20%
Savings
Sight
deposits
Consumer
credit
0%
5
1. Savings deposits/GDP ratio, in per cent

Savings deposits on a growing trend
60
NL
50
40
euro 16
30
20
10
0
I
II
III
2007
IV
I
II
III
2008
IV
I
II
III
2009
IV
I
II
2010
Source: DNB, ECB
6
Savings deposits mix and rate differential


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Mix of savings varied strongly during crisis
Households reacted on rate differentials
Agreed maturity at top 40%, but now 12%
70
€ bln
2,0
60
%
50
1,5
40
Freely redeemable
30
1,0
20
0,5
Agreed maturity
10
Sight
0
0,0
I
II
III
2007
IV
I
II
III
2008
IV
I
II
III
2009
IV
I
II
2010
I II III IV I II III IV I II III IV I II
2007
2008
2009
2010
-0,5
Source: DNB
7
2. Household equity holdings/GDP, in per cent 1)

Holdings of quoted equity & mutual fund shares
dropped sharply in 2007-2008
35
30
25
20
euro 16
15
10
NL
5
0
I
III
II
2007
Source: DNB, ECB
IV
I
III
II
2008
IV
I
III
II
2009
IV
II
I
2010
1) Quoted equity and mutual fund shares
8
Household equity holdings1) highly correlated with stock market
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Value drop due to price losses: € 11,1 bln (≈ 2% GDP)
Also net equity sales: € 9,9 bln
Share of all securities fell from 10% to 7% of total assets
600
70
€ bln
60
500
AEX-index
50
400
40
300
30
200
20
100
10
0
0
I
II
III
2007
IV
I
III
II
2008
Dutch equities
Source: DNB
IV
I
III
II
IV
I
III
2010
2009
Foreign equities
II
AEX-index
1) Quoted equity and mutual fund shares
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3. Old age pensions in the Netherlands
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Dutch system consists of 3 pillars:
* State / social security
* Funded employer pension scheme
* Funded individually arranged pensions
Pillar 1+2 should result in pension ≈ 70% of wage
Future pension rights are calculated using interest
rate swap curve (supervisory requirement)
Statistically, liabilities of pension funds are financial
assets of households
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Net equity households in life & pensions/GDP
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
Net equity/claims in life & pensions is increasing
Dutch share in euro area almost 18%
180
160
NL
140
120
100
80
60
euro 16
40
20
0
I
II
III
2007
Source: DNB, ECB
IV
I
II
III
2008
NL
IV
I
II
III
2009
IV
I
II
2010
EURO 16
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Why increase in net equity life/pensions?
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•
•
 declining interest rates
 higher life expectancy
Present value of future
liabilities increases
Pension funds should
have more assets now
because of the low return
of current investments
Technical reserves of pension funds and life insurers
Billions of euros
1.000
5,5
900
5,0
800
4,5
700
4,0
600
3,5
500
3,0
400
2,5
300
200
2,0
100
1,5
0
1,0
I
II
III
2007
Source: DNB
IV
I
II
III
IV
2008
Technical reserves
I
II
III
IV
2009
I
II
III
2010
10 yr swaprate
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Do pension funds have enough assets now?
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Not to achieve fully inflation-proof pensions
Interest rate decline caused liabilities to
increase more (+15%) than assets (+7%) in
2008
Pension funds underestimated portfolio risks:
 shocks larger than in standard model
As a result buffers and
funding ratio declined:
Estimated funding ratio pension funds ( % )
160%
140%
120%
105%
100%
80%
60%
40%
I
II
III
2007
IV
I
II
III
2008
IV
I
II
III
2009
IV
I
II
2010
13
Net equity in pension funds – some qualifications, and conclusions
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Rise in banks savings and pension claims
outweighted losses on equities during crisis
Does higher net equity mean that HH became
richer? Are you ‘richer’ when you live longer?
Households cannot take out their pensions (no free
savings)
Statistical measurement of future liabilities cannot
predict whether pension funds will meet their
obligations
For a realistic view  not focus only at HH balance
sheet; also look at financial situation of agency that
invests collective savings for retirement
14
Household financial assets in the Netherlands
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