ESRB European Systemic Risk Board : Notification by De Nederlansche Bank (Central Bank of the Netherlands) on systemic risk buffer and on five other systematically important institutions (O-SIIs)

Notification template for Article 131 CRD - Other Systemically Important Institutions (O-SII)

Please send this template to

• •[e-mail] when notifying the ESRB;

• •[e-mail] when notifying the ECB;

• •[e-mail] when notifying the EBA.

Emailing this template to the above-mentioned addresses constitutes an official notification, no further official letter is required. In order to facilitate the work of the notified authorities, please send the notification template in a format that allows electronically copying the information.

1. Notifying national authority
1.1 Name of the notifying authority	De Nederlandsche Bank N.V.
2. Description of the measure
2.1 Concerned institution or group of institutions	ING Bank N.V. ("ING") (LEI: 3TK20IVIUJ8J3ZU0QE75); Coöperatieve Rabobank U.A. ("RABO") (LEI: DG3RU1DBUFHT4ZF9WN62).; ABN AMRO Bank N.V. ("ABN") (LEI: BFXS5XCH7N0Y05NIXW11); BNG Bank N.V. ("BNG") (LEI: 529900GGYMNGRQTDOO93); De Volksbank N.V. (Volksbank) (LEI: 724500A1FNICHSDF2I11) The buffer requirements are imposed on the aforementioned institutions on the basis of the highest level of consolidation Note/clarification on the sentence "The buffer requirements are imposed on the aforementioned institutions on the basis of the highest level of consolidation": When filling in the template, the national authority is asked to which concerned institutions or group of institutions the measure is applicable (question 2.1). In three cases the entities referred to in our answer to question 2.1 differ from the ones we referred to in our answer to question 2.3. This is the case for ING, ABN AMRO and De Volksbank. The reason is that the relevant provisions in Dutch law transposing Article 131 CRD (i.e. Article 3:62a of the Financial Supervision Act and Articles 105c and 105d of the Decree on Prudential Rules) prescribe that -in case of an ultimate EU parent that is not an institution but a (mixed) financial holding company- the buffer requirement applies to the institution (i.e. supervised credit institution and holder of the banking license) that is the subsidiary of the EU (mixed) financial holding company, on the basis of the consolidated financial

Date of template version: 2016-03-01

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position of that holding company. Applying the buffer requirement to the institution, does not say anything about how the buffer requirement is calculated. In our case, all five entities referred to in our reply to question 2.1 are required to maintain a capital buffer on the basis of the highest level of consolidation, i.e. including the whole supervised group of which either an EU parent institution (in case of Rabobank and BNG Bank) or an EU parent financial holding company (in case of ING, ABN AMRO and Volksbank) is the ultimate EU parent undertaking. For ING, ABN AMRO and De Volksbank the buffer requirements would be based on the consolidated exposures/RWA of respectively ING Group, ABN AMRO Group and Volksholding B.V. Therefore, the buffer requirements are in line with the provisions in Dutch law transposing Article 131 CRD and do not differ in (consolidation) scope or level from the ones imposed and notified by DNB in previous years.
2.2 Level of the buffer applied	2% O-SII in case of ING Bank N.V.; Coöperatieve Rabobank U.A.; ABN AMRO Bank N.V. and 1% for BNG Bank N.V. and De Volksbank N.V. For ING Bank N.V.; Coöperatieve Rabobank U.A. and ABN AMRO Bank N.V., a SRB of 3% applies. The highest of the buffers is applicable.
2.3 Name of the EU ultimate parent institution	The 5 aforementioned entities have the following EU ultimate parent undertaking (either EU parent institution or EU parent financial holding company): ING: ING Groep N.V. RABO: Coöperatieve Rabobank U.A. (same as under 2.1) ABN: ABN AMRO Group N.V. BNG: BNG Bank N.V. (same as under 2.1) Volksbank: Volksholding B.V..
2.4 Names of subsidiaries	For subsidiaries, see: ING Groep N.V.: Annual report, page 218https://www.ing.com/About-us/Annual-reporting-suite/Annual-Reports-archive.htm Coöperatieve Rabobank U.A.: Annual report, page 238 https://www.rabobank.com/en/press/search/2018/20180315-rabobank-publishes-integrated-annual-report-2017.html.; ABN AMRO Group.: Annual report, page 168, 169 and 306 https://www.abnamro.com/en/about-abnamro/our-company/annual-report/index.html BNG Bank N.V.: Annual report, page 290https://www.bngbank.com/financials/annual-report De Volksbank N.V: Annual report, page 176https://www.snsbanknv.nl/en/investor-relations/annual-reports
3. Timing of the measure
3.1 Timing of the Decision	A preliminary decision has been taken on October 16th. Should the ECB advise revisions to this decision, these will be duly considered in good faith. We plan to

make our final decision on November 1st.
3.2 Timing of the Publication	We plan to publish our decision by December 1st.
3.3 Disclosure	Since it is only a confirmation of previous buffers, we will publish a notification on our website.
3.4 Timing of Application	Since the buffers are unchanged, there is no particular timing of application. So the previously envisaged phasing in will be maintained.
3.5 Phasing in	The buffer is phased in between 2016 and 2019 in equal steps of 25%.
3.6 Review of the measure	The buffers do not change for any institution and we simply confirm previous levels. The next review will take place next year.
4. Reason for O-SII identification and activation of the O-SII buffer
4.1 Scores of concerned institution or group of institutions, as per EBA guidelines on the assessment of O-SIIs (Article 131.3)	Name	O-SII score	O-SII buffer	SRB
	ING	3.991	2%	3%
	RABO	2.409	2%	3%
	ABN	1.527	2%	3%
	BNG	517	1%	0%
	Volksbank	196	1%	0%
4.2 Methodology and indicators used for designation of the O-SII (Article 131.3)	Please provide information on: a. whether you followed the EBA guidelines on the assessment of O-SIIs Yes, DNB has fully complied with EBA guidelines. b. which threshold score has been set to identify O-SIIs 350 basis points c. which of the optional indicators have been used to justify supervisory assessment decisions, if any, and what are the scores (i) total exposure-at-default, (ii) type of customers, (iii) number of deposit accounts - retail, (iv) deposits guaranteed under deposit guarantee system, (v) potential reputational contagion, (vi) potential contagion through shareholders, (vii) potential contagion through entities in conglomerate. d. why these optional indicators are relevant for the Member State (i) Total exposure-at-default: this indicator belongs to the 'Size' category. Some banks have a relatively high amount of off-balance activities. For these banks, total assets is not an adequate reflection of their size. (ii) Type of customers: this indicator belongs to the 'Substitutability' category. If banks operate in a niche market that relatively few other parties are active in, the provision of critical functions could (temporarily) be disturbed if the respective bank fails. (iii) Number of deposit accounts - retail: this indicator belongs to the 'Substitutability' category. The impact of problems in banks with many retail clients would be relatively high because it would disrupt the access of many depositors to their funds. (iv) Deposits guaranteed under national deposit guarantee system: this indicator belongs to the 'Interconnectedness' category. When a bank fails, depositors will be repaid up to €100,000. The other domestic banks have to share the costs, however, since they guarantee one another's

deposits. This is, therefore, a direct contagion channel, as we witnessed in the recent financial crisis. (v) Potential contagion through shareholders: this indicator also belongs to the 'Interconnectedness' category. If banks have large a large stake in one another, or if the government is a major shareholder, there could be contagion effects. (vi) Potential reputational contagion: this indicator belongs to a separate category called 'Behavioural effects'. The failure of one bank with a particular business model may result in a loss of trust in banks with comparable business models. (vii) Potential contagion through entities in conglomerate: this indicator belongs to the 'Behavioural effects' category. If entities within a conglomerate have the same brand name, there could also be contagion effects. e. why the bank is systemically important in terms of those particular optional indicators The abovementioned criteria lead to the classification of one bank as O-SII: De Volksbank. This is based on the criterion deposits guaranteed under deposit guarantee system. For its relevance see the previous response. f. whether relevant entities with relative total assets not in excess of 0.02% have been excluded from the identification process n/a g. names and scores of all relevant entities not excluded from the identification process (could be sent in a separate excel file, see 4.1) A separate excel file with the scores will be sent to the EBA. h. whether non-bank institutions have been included in the calculations n/a
4.3 Supervisory judgement	Yes, DNB has used the supervisory overlay, as prescribed in the EBA Guideline, to identify one bank (de Volksbank) as an O-SII.
4.4 Calibrating the O-SII buffer	See Section 4.2 and section 4.5
4.5 Effectiveness and proportionality of measure	The impact of the failure of a systemic bank on the domestic financial sector and the real economy is much larger than the impact of failure of a non-systemic bank. Therefore, the probability of default of systemic banks should be significantly reduced. This can be accomplished by increasing the loss absorption capacity through higher buffer requirements. As a bank's systemic importance rises, it will typically be required to maintain a proportionally higher systemic buffer. The higher capital requirements will structurally increase the solvency of systemic banks in the Netherlands. This positively affects the stability of the Dutch financial system and with that, the Single Market.
5. Cross-border and cross-sector impact of the measure
5.1 Assessment of cross-border effects and the likely impact on the internal market (Recommendation ESRB/2015/2)	As the measure applies to Dutch banks on the basis of the highest level of consolidation, there may be an impact on individuals or companies outside the Netherlands through exposures of subsidiaries and branches. However, given the current capitalisation level of the identified banks and the phasing-in of the buffer requirement, DNB expects the impact to be limited.
5.2 Assessment of leakages and regulatory arbitrage within the notifying Member State	The O-SII buffer and the SRB are imposed on the supervised institution on the basis of the highest level of consolidation, this avoids (jurisdictional) shifts of activities within groups due to regulatory arbitrage. Systemic banks may take measures to reduce their systemic importance, possibly including a shift of activities to non-regulated entities. However, due to the level of the capital increase and the current capitalisation level of the identified O-SIIs, we expect these incentives to be small. Furthermore, if banks reduce their systemic importance in an orderly manner, this could also be beneficial for financial stability.
6. Combinations and interactions with other measures
6.1 Combinations between G-SII and O-SII buffers (Article 131.14)	In case of our only G-SII (ING), the O-SII is higher and also applied on a consolidated basis, and therefore only the O-SII applies.
6.2 Combinations with SRB buffers (Article 131.14 + Article 133.5)	Are any of the institutions subject to a systemic risk buffer? Yes, ING Bank N.V.; Coöperatieve Rabobank U.A. and ABN AMRO Bank N.V are subject to a systemic risk buffer, on the basis of the highest level of consolidation and applicable to all exposures. If yes, please provide the following information: a. 3% b. No c. Yes
6.3 O-SII requirement for a subsidiary (Article 131.8)	n/a
6.4 Interaction with other measures	We carefully monitor overlap between measures. Apart from the buffers for systemic importance (G-SII, O-SII and SRB), we do not see overlap of measures (e.g. with Pillar 2). Since the highest of the 3 buffers for systemic importance applies, we don't see overlap in this regard either.

7. Miscellaneous
7.1 Contact person(s) at notifying authority	Kenny Martens, [phone],[e-mail]
7.2 Any other relevant information