The Netherlands achieves high overall compliance with international standards and codes, with a score of 65 out of 100 in our Standards Compliance Index. As a Eurozone country, the Netherlands' compliance in the area of macroeconomic fundamentals and financial supervision is high. In the area of market infrastructure, too, the Netherlands is making progress on all fronts. Its anti-money laundering regime appears to be in line with the FATF Recommendations, however there is no assessment available with respect to compliance with the 2004 revised methodology. Its payment system and insolvency framework are broadly compliant with international regulations. The Netherlands is also moving towards convergence with international auditing and accounting standards, and the Dutch Corporate Governance Code is universally applied. However, the Code's enforcement and effectiveness have yet to be assessed.

Macroeconomic Policy and Data Transparency

According to the International Monetary Fund's (IMF) 2007 Article IV Consultation report, the Netherlands produces a broad variety of statistical data, and achieves a general standard of high quality in its published macroeconomic data. The Netherlands has subscribed to the Special Data Dissemination Standards (SDDS) since June 1996, and meets SDDS specifications for the coverage, periodicity, and timeliness of the data. The information on the SDDS website indicates that the Netherlands satisfies the conditions for access for all data categories and integrity, and quality for most data categories. Per the 2007 Article IV report, 2006 saw a number of institutional reforms that have had an impact on Netherlands statistics, particularly in the reclassification of private and public consumption as a result of healthcare insurance reforms. More »

The Netherlands adopted the Euro with its launch in January 1999. Thus, its monetary policy is no longer governed by the Dutch central bank. Rather, the Governing Council of the European Central Bank (ECB) determines Dutch monetary policy, and the Eurosystem (consisting of the ECB and the central banks of the member states that have adopted the Euro) is responsible for its implementation. According to the IMF, the Eurosystem and the ECB maintain high transparency standards and a commitment to openness. The ECB observes the IMF's codes and standards for monetary policy transparency and pursues an active policy of communication with the public. More »

The IMF's Fiscal Transparency Module of its Report on the Observance of Standards and Codes (ROSC) asserts that the Netherlands "achieves or exceeds the good practice standards against each of the four general principles of the fiscal transparency code." One area where improvements could be made is in the fiscal reporting and accountability practices of municipal level governments, departmental agencies, and non-departmental agencies. The ROSC called for a more thoroughgoing application of the fiscal reporting standards of the 1995 version of the European Standards of Accounting, again at the lower levels of government. Transparency is also diminished by the fact that the departmental agencies and the ZBOs use different accounting systems. To resolve some of these problems, the mandate of the Dutch Court of Audit could be expanded to allow it to track the expenditure of government issued funds by municipalities. The Netherlands subscribes to the IMF's Special Data Dissemination Standard and meets all the requirements for coverage, periodicity, and timeliness. It produces summary methodologies for all datasets and publishes advance release calendars for all relevant statistical releases. More »

Institutional and market infrastructure

The European Commission's Expert Group's 2003 final report entitled "Best Project on Restructuring, Bankruptcy, and a Fresh Start" states that the Netherlands has fully adopted 16, almost fully adopted 20, and partially adopted 5 of the World Bank's Principles and Guidelines for Effective Insolvency and Creditor Rights Systems. According to a 2005 PricewaterhouseCoopers (PWC) report, the Netherlands' current Bankruptcy Act provides for insolvency to be handled by either bankruptcy or moratorium, with the latter having been originally intended to serve as a rescue mechanism for insolvent but nonetheless potentially viable firms. The PWC report adds that, due to peculiarities of the Dutch legislative system, the moratorium has ceased to optimally serve its original purpose, and even where at least partial rescue is the intended outcome, bankruptcy is the more popular proceeding. A two-phase reform program has been introduced to address this and other shortcomings in Dutch insolvency law. According to the World Bank's "Doing Business" snapshot of closing a business in the Netherlands in 2008, it takes 1.1 years to close a business, at a cost of 4% of the insolvent firm's estate, with a return to the creditors averaging 86.7 cents on the dollar. This compares to the average situation for member states of the Organization for Economic Cooperation and Development, where it takes 1.3 years, costs 7.5% of the estate, and returns 74.1 cents on the dollar. More »

In line with the European Commission Regulation No. 1606/2002, listed companies in the Netherlands are required to use International Financial Reporting Standards (IFRSs) in their consolidated accounts. In 2006, the European Commission published a report on the implementation of IFRSs in European Union (EU) member states, in which it points out that the Netherlands permits IFRSs in the annual accounts for listed companies and annual and consolidated accounts for all other companies. Dutch law allows the option to use either IFRSs or Dutch Generally Accepted Accounting Principles (GAAPs). The Dutch GAAP refer largely to the Dutch Civil Code and the Guidelines on Annual Reporting issued by the Dutch Accounting Standards Board (DASB). According to a 2006 KPMG publication, between 1998 and 2003, Dutch GAAPs were rapidly converging with IFRSs. However, with the implementation of the EU regulation on IFRSs, the focus of the DASB has shifted to establishing requirements for unlisted companies and ensuring consistency with Dutch law and regulations. The KPMG report observes that, as a consequence, the differences between IFRSs and Dutch GAAPs have been growing over the last few years, and they are likely to increase in the future. More »

According to the IMF's 2004 Financial System Stability Assessment, the Netherlands is reforming its corporate governance practices. This should increase confidence in Dutch companies and financial institutions, especially in light of prior high profile corporate scandals. In 2004, the Dutch Corporate Governance Code entered into force on a "comply-or-explain" basis. The Corporate Governance Code Monitoring Committee's 2006 report on compliance with the Dutch corporate governance code indicates that compliance has improved since 2005, reaching an average of 96 percent compliance with the provisions of the code, but there are still concerns regarding shareholder's participation and transparency of director's remuneration. Since, 2004, several other pieces of legislation have been introduced to further strengthen corporate governance in the Netherlands. More »

According to the 2004/2005 Annual Report of the Netherlands Institute of Registered Accountants (NIVRA), the national auditing standards are known as the Dutch Standards on Auditing (RACs). Most International Standards on Auditing (ISAs) have been translated and incorporated in the RACs, with adaptations to reflect the local legal environment. The NIVRA 2006 self-assessment confirmed that the Netherlands adopts International Auditing and Assurance and Standards Board (IAASB) pronouncements as national standards, again with changes in accordance with the Dutch legal and regulatory environment. On May 17, 2006, Directive 2006/43/EC of the European Parliament and the Council came into force. This requires all statutory audits of annual and consolidated accounts to be carried out on the basis of ISAs as adopted by the European Commission. European Union member states shall adopt and publish the provisions necessary to comply with this Directive before June 29, 2008. Member states may impose additional requirements relating to the statuary audits of annual and consolidated accounts for periods expiring on June 29, 2010. More »

The 2007 U.S. Department of State (DoS) report maintains that the Netherlands is compliant with all the Financial Action Task Force (FATF) Recommendations on Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) with respect to both legislation and enforcement. However, this report does not address the Netherlands' compliance with the individual FATF 40+9 recommendations and, apart from this statement of compliance from the DoS report, there is very little information publicly available addressing the Netherlands' compliance with the FATF recommendations. The 2004 ROSC on AML/CFT by the IMF also attests that the Netherlands complies well with most of the FATF Recommendations. However, the 2004 ROSC is based on the 2002 (old) methodology, and the FATF revised its methodology in 2004. The Netherlands criminalized money laundering in 1994 and terrorist financing in 2004. It complies with the Second and Third EU Money Laundering Directives. The De Nederlandsche Bank (DNB) website states that the Disclosure of Unusual Transactions (Financial Services) Act (Wmot), which entered into force in 1994, is the key legal instrument in the fight against money laundering. The Dutch Government, per the 2007 U.S. DoS report, has recently taken steps to make the AML/CFT regime more effective, including issuing a money-laundering Directive in November 2005 on financial crime investigation, prosecution and the use of financial intelligence. The authorities also introduced a new set of indicators in November 2005 on the filing of unusual transactions based on risk and amended the Wmot and the Identification (Provision of Services) Act in May 2006, thereby expanding supervisory authority, introducing punitive damages and incorporating terrorism financing as an indicator in reporting unusual transactions. More »

In 2004, the ECB assessed the Dutch large-value interbank payment system, called TOP, as part of its assessment of all domestic Trans-European Automated Real-time Gross Settlement Express Transfer System (TARGET) components. The report concludes that TOP fully observes seven out of the ten Core Principles (CPs) and broadly observes two (CPs VII and VIII). The ECB finds that CP V is not applicable. A 2007 report by De Nederlandsche Bank (Dutch central bank or DNB), states that TOP is categorized as the systemically important payment system (SIPS) in the Netherlands. TOP is also the Dutch real-time gross settlement (RTGS) system. The International Monetary Fund conducted a Financial System Stability Assessment of the Netherlands in 2004, at which point it did not assess TOP because an earlier (2001) European Central Bank assessment had indicated that TOP was broadly compliant with Core Principles for Systemically Important Payment Systems (CPSIPS). The DNB has also assessed TOP in the course of its oversight of the system, and published its findings in a 2007 report. As regards CP VII, the Netherlands is in the process of satisfying with the more stringent business continuity requirements imposed by the European System of Central Banks and the Joint Business Continuity Working Group in the wake of the 9/11 terrorist attacks. The DNB assessment avers that once work is completed on this front, TOP will be fully compliant with CP VII. The Netherlands is expected to migrate to the Euro area payment system, TARGET2, on February 18, 2008. TARGET2 is a centralized system with a common technical platform that allows it to provide a harmonized level of service for its members. More »

Financial Regulation and Supervision

The 2007 IMF Article IV report notes that the banking sector in the Netherlands is generally strong and stable, with a capacity to withstand adverse macroeconomic shocks. The report commends the country's risk-oriented, cross sectoral supervisory framework, which represents international best practice. The IMF, in 2004, conducted a detailed assessment of the Netherlands banking supervision practices against the Basel Core Principles (BCPs) for Effective Banking Supervision and concluded that the Netherlands complied to a very high degree with the BCPs. The assessment also noted that many of its recommendations were, according to the Netherlands' authorities, expected to be addressed in the bill on financial supervision that came into force in 2007 as the Financial Supervision Act. Despite the positive assessment by the IMF in 2004 and consequent reports indicating the overall strong financial sector in the Netherlands, there is scant information publicly available addressing the effectiveness of the Act in implementing the BCPs. According to Dutch central bank (De Nederlandsche Bank, or DNB) website the Act is the current law governing financial supervision in the country. The Financial Supervision Act replaced earlier laws pertaining to financial supervision in the country, specifically the Act on the Supervision of the Credit System 1992 for the banking sector. The 2007 IMF report applauds the Netherlands as a frontrunner in implementing international standards such as Basel II and Solvency II, as well as International Financial Reporting Standards. More »

According to the 2004 IMF Financial System Stability Assessment, the Dutch financial regulatory system is mostly in compliance with International Organization of Securities Commissions (IOSCO) Principles and Objectives of Securities Regulation. The IMF attributed the effective regulation to a strong regulatory body with the necessary powers to carry out its responsibilities and increasingly risk-based regulatory approach. At the time of the assessment, the new law on financial supervision was expected to largely complete the ongoing regulatory transformation and address the few departures from IOSCO's Principles and Objectives. Indeed the Financial Supervision Act of 2006 entered into effect in January 2007 and applies a functional, as opposed to sectoral approach to financial markets supervision. There is no assessment as to whether the new law has effectively addressed all outstanding issues however. Nonetheless, the 2007 IMF Article IV Consultation with the Netherlands reports that, since the full implementation of the new financial supervisory framework, there has been improvement to financial firms' supervision and risk management practices. The supervisory framework and quality of supervision mostly represents international best practices. More »

The 2004 FSSA by the IMF found a high level of observance of the Insurance Core Principles (ICPs) in the Netherlands and observed that the country meets the conditions necessary for effective insurance supervision. The FSSA recommendations chiefly pertain to clarity of supervisory regulations and expectations; supervisor transparency in areas like the stages of supervisory intervention, international cooperation, and information sharing between supervisors; on-site supervision; and disclosure by insurers. The IMF noted, however, that a number of pending legislative and supervisory initiatives hold the promise of substantially improving Dutch compliance with ICPs. It is pertinent to note that at the time of the 2004 FSSA, the insurance sector was supervised by two agencies: the Pensions and Insurance Supervisory Authority (PVK), which conducted prudential supervision, and the Financial Markets Authority (AFM), which was responsible for market conduct supervision. The FSSA focused its assessment on the supervisory role and powers of the PVK. However, the PVK merged with the Dutch central bank (DNB) in October 2004 to form an integrated financial supervisor. Since then, the DNB is the prudential supervisor, while the AFM continues to supervise the conduct of business. The FSSA, therefore, may not be entirely relevant, and there is no subsequent assessment of the DNB as the new insurance and pension sector supervisor. However, recent IMF reports describe a sound and well-supervised financial sector in the Netherlands and commend the country on implementing many of the 2004 FSSA recommendations. More »

Legend:

Credit Ratings

Moody's Aaa/Stable

Fitch AAA/Stable

Standard & Poor's AAA/Stable

Macroeconomic Data

2007 GDP (Current Prices): 768.704 billion USD (IMF)

2007 GDP (Per Capita): 46,261 USD (IMF)

2008 GDP (Growth Forecast): 2.1% (IMF)

2008 Inflation (CPI): 2.4% (IMF)

2007 Unemployment: 4.5% (CIA)

2006 Foreign Direct Investment

FDI (Inward): 4.371 billion USD (UNCTAD)

FDI (Outward): 22.692 billion USD (UNCTAD)

2006 Official Development Assistance

ODA (Received): N/A million USD (OECD)

ODA (Disbursed): 5,452 million USD (OECD)