Netherlands - Banking and securities

The Netherlands Bank, nationalized in 1948, is the central bank. It issues the currency and supervises the privately owned banks. Since the 1950s, the Netherlands Bank had used reserve regulations and the central bank discount rate as instruments of monetary policy, but with the introduction of the European Central Bank, those responsibilities are now more centralized for all of the EU. The Dutch financial services industry has a long and distinguished history and has introduced many banking innovations to the world. Since the late 1980s, the sector has undergone a revolution. A common strategic desire to expand and to gain more financial strength, combined with deregulation of the financial market, prompted several bank mergers and the formation of financial conglomerates of banks and insurance groups. As a result, the number of dominant participants in the market has diminished to a handful, each providing the full range of financial services. The Netherlands Middenstands-bank (NMB) and the state-owned Postbank merged to form the NMB Postbank in 1989, which in turn merged again with the Nationale Nederlanden insurance group to form the International Nederlanden Groep (ING) in 1991. The large ABN and Amro commercial banking groups joined up to form ABN-Amro in 1990. VSB-bank, a conglomerate of savings banks, teamed up with the Ameu insurance group and Belgium's AG insurance group in 1990 to form the Dutch-Belgian Fortis group.

Rabobank, a large cooperative group which specializes in the provision of agricultural credits and mortgage facilities but has been rapidly expanding its product portfolio in recent years, took a 50% share in the Robeco investment group in 1996. The robust nature of the Dutch banking industry came to fore once again in December 1999. Although it ultimately failed, ING made headlines through its attempted takeover of the French Crédit Commercial de France (CCF). Had ING's bid succeeded, it would have been the first successful merger of a French bank with another European financial institution.

The International Monetary Fund reports that in 2001, currency and demand deposits—an aggregate commonly known as M1—were equal to $145.3 billion. In that same year, M2—an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual funds—was $409.3 billion.

The Netherlands has the oldest stock exchange in the world, the Amsterdam Stock Exchange (ASE); founded in the early 17th century, it is now one of the largest stock exchanges in operation. The issuance of new securities on the exchange is supervised by the Netherlands Bank, acting in cooperation with the commercial banks and stockbrokers.

The comparatively large share of foreign security listings and capital supply gives the ASE an international importance disproportionate to its size. Its strong international orientation is also reflected in the fact that its share of Europe's total market capitalization far outweighs the relative importance of the Dutch economy. The multinational nature of the major Dutch companies, which has led to their shares being quoted on a number of international stock markets, means that stock price levels on the ASE are heavily influenced by developments elsewhere. The three largest companies, Royal Dutch Shell, Unilever, and ING, account for around 50% of total stock market capitalization.

In order to enhance the international competitiveness of the ASE, many reform measures have been taken in the past few years, with varying degrees of success. These include the introduction of a new electronic trading system open to foreign-based brokers, a division of the market into a wholesale and a retail segment, and a revamp of the exchange's organizational structure. Moreover, in early 1996, under pressure from the government, the stock exchange introduced an arrangement that aims to reduce the influence of the wide range of anti-takeover devices quoted corporations are permitted, which has long been considered as one of the exchange's most important shortcomings. Under the new arrangement, a prospective buyer who has gained 70% of a company's shares can turn to the Amsterdam Court of Justice after a period of 12 months.

On 1 January 1997, the Amsterdam Exchanges (AEX) were formed by the merger of the Amsterdam Stock Exchange (ASE) and the city's European Options Exchange (EDE). From approximately 680 at the end of January, the AEX index of 25 leading shares rose to 700 on 11 February 1997 and sped on to almost 775 by mid-March before suffering a correction prompted by the release of disappointing financial results by a brewing company, Grolsch, and fears of interest rate increases in the U.S. In 1998 the world capitalization rankings placed the equity market eighth in the world, while the volume of options contracts at the options market ranked fourth. By early 2003, however, the AEX index had dropped to 303.21, down 39% from the previous year.

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