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Last Updated: October 2009

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Netherlands

	Score	Rank
Financial Standards Index	73.33 out of 100	1
Business Indicator Index	10.98 out of 12	12

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12 Key Standards Overview
Summary by Standard
Business Indicator Summary
Quick Facts & Global Indices

Overall Standards Summary

The Netherlands achieves high overall compliance with international standards and codes, with a score of 73.33 out of 100 in our Standards Compliance Index. As a member of the euro area, compliance for the Netherlands in macroeconomic policy and financial supervision is high. In the area of market infrastructure, too, the Netherlands is making progress on all of the standards. The Financial Action Task Force has named the Netherlands as one of the jurisdictions that have endorsed the FATF's 40+9 recommendations. Also, in 2008 the Netherlands migrated from TARGET to TARGET2. The European Central Bank (ECB) has assessed TARGET2's design against the Core Principles for Systemically Important Payment Systems (CPSIPS) and concluded that TARGET2 fully observes all relevant CPSIPS. In addition, according to a 2006 Netherlands Institute of Registered Accountants self-assessment, the Netherlands adopts International Auditing and Assurance and Standards Board (IAASB) pronouncements as national standards, and the Netherlands supports ongoing convergence of public interest entities' accounting with International Financial Reporting Standards. Finally, a corporate governance code entered into force on a "comply-or-explain" basis in 2004, and the code was updated again in 2008.

Choose a standard for a detailed compliance report:

12 Key Standards for Sound Financial Systems	Compliance Level
Special Data Dissemination Standard	FC
Code of Good Practices on Transparency in Monetary Policy	FC
Code of Good Practices on Transparency in Fiscal Policy	FC
Effective Insolvency and Creditor Rights Systems	CP
International Financial Reporting Standards	ID
Principles of Corporate Governance	EN
International Standards on Auditing	EN
Anti-Money Laundering/Combating Terrorist Financing Standard	ID
Core Principles for Systemically Important Payment Systems	CP
Core Principles for Effective Banking Supervision	CP
Objectives and Principles of Securities Regulation	CP
Insurance Core Principles	CP
II = Insufficient Information \| NC = No Compliance \| ID = Intent Declared \| EN = Enacted \| CP = Compliance in Process \| FC = Full Compliance

Macroeconomic Policy and Data Transparency

FCSpecial Data Dissemination Standard

The International Monetary Fund's (IMF) 2008 Report on the Observance of Standards and Codes (ROSC) notes that the country produces a broad variety of statistical data, and achieves a general standard of high quality in its published macroeconomic data. The Netherlands first subscribed to the IMF's Special Data Dissemination Standard (SDDS) in June 1996, and has met SDDS specifications for the coverage, periodicity, and timeliness of the data since April 2000. The information on the SDDS website indicates that the Netherlands satisfies the conditions for access and integrity for all data categories, and generally satisfies the SDDS requirements for quality. The only exception observed on the SDDS website is that the Netherlands provides no information on the SDDS website regarding dissemination of component detail, reconciliation and cross checks on its production index data. The ROSC asserts that the principle statistics agencies of the Netherlands – the central bank and Statistics Netherlands – recognize the importance of accurate statistical work. Data are available on these agencies' websites and in a variety of published formats. Staff cuts at Statistics Netherlands in recent years have given rise to concerns at the IMF as to whether or not that agency will be able to take on new projects aimed at improving the agency's statistical product.

FCCode of Good Practices on Transparency in Monetary Policy

The Netherlands adopted the euro at 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. In 2009, the IMF voiced its support for the ECB’s accommodative monetary policy in response to the global financial crisis and recession in the European Union (EU). The Fund urged continued monetary easing in order to prevent a still-possible deflationary spiral, and called for quicker action from the EU in order to repair the financial system.

FCCode of Good Practices on Transparency in Fiscal Policy

The IMF's 2005 ROSC – Fiscal Transparency Module asserts that the Netherlands is in full compliance with all four general principles of the IMF’s 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 calls for a more thorough 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 departmental agencies and semi-autonomous agencies 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. In the wake of the global financial crisis that peaked in late 2008, the Netherlands has responded with extensive government financing, committing amounts that are roughly in line with the European Union average. The Netherlands subscribes to the IMF's Special Data Dissemination Standard and meets all the requirements for coverage, periodicity, and timeliness of data. It produces summary methodologies for all datasets and publishes advance release calendars for all relevant statistical releases.

CPEffective Insolvency and Creditor Rights Systems

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 report published by PricewaterhouseCoopers (PWC), 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 is no longer the optimal means by which to achieve its original purpose. Instead, even where at least partial rescue is the intended outcome, bankruptcy has become the more popular proceeding. A two-phase reform program has been introduced to address this and other shortcomings in Dutch insolvency law. In late 2007, C. Zijderveld wrote a description of the changes to Dutch insolvency legislation that were contained in a new draft Insolvency Law. However, there is no more recent information as to the status of the draft, which was presented to the Dutch parliament in November 2007.

IDInternational Financial Reporting Standards

In line with the European Commission Regulation No. 1606/2002, listed companies in the Netherlands are required to use International Financial Reporting Standards (IFRSs) as adopted by the European Union (EU) in their consolidated accounts. The 2008 European Commission report on the implementation of IFRSs in EU member states points out that the Netherlands permits IFRSs in the annual accounts for listed companies and annual and consolidated accounts for all other companies. Companies that choose not to apply IFRSs, follow the Dutch Generally Accepted Accounting Practices (GAAP) comprised largely of 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 GAAP were rapidly converging with IFRSs. However, with the implementation of the EU regulation, 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. A 2009 report by Deloitte & Touche Tohmatsu also points out that many differences still exist between the international standards and the Dutch GAAP, and that these differences will widen as IFRSs keep changing. A 2009 Netherlands Institute of Registered Accountants self-assessment notes that the Netherlands will continue to support ongoing convergence of public interest entities' accounting with IFRSs and to develop simplified requirements for private entities. With respect to reporting requirements for small and medium sized enterprises (SME), another November 2009 Deloitte publication points out differences between the Dutch requirements and IFRS for SMEs.

ENPrinciples of Corporate Governance

According to the International Monetary Fund's (IMF) 2004 Financial System Stability Assessment, the Netherlands was reforming its corporate governance practices, which was expected to increase confidence in Dutch companies and financial institutions. In 2004, the Dutch Corporate Governance Code entered into force on a "comply-or-explain" basis. The Code was updated again in 2008 to strengthen areas of risk management, executive pay, shareholder responsibility, supervisory board composition, and corporate social responsibility. 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. The Committee’s 2007 monitoring report notes that the compliance level remains high. Executive compensation is a major issue in the Netherlands, according to both the Committee’s 2007 report and a 2009 report by the Organization for Economic Cooperation and Development. “Say on pay” votes have been introduced to give shareholders the right to vote on executive pay policy, total remuneration of the board, and on stock and option plans. Since 2004, several other pieces of legislation have been introduced to further strengthen corporate governance in the Netherlands. The IMF also notes that the Netherlands intends to develop a voluntary code of conduct to bring executive compensation policies “broadly in line” with G20 recommendations.

ENInternational Standards on Auditing

According to a 2006 Netherlands Institute of Registered Accountants (NIVRA) self-assessment, the Netherlands adopts International Auditing and Assurance and Standards Board (IAASB) pronouncements as national standards, with changes in accordance with the Dutch legal and regulatory environment. The self-assessment explains that all new ISAs are translated and adopted by the Institute and made mandatory for members. Overall, the NIVRA supports global harmonization of auditing standards and in a 2009 action plan prepared as part of the International Federation of Accountants' Member Body Compliance Program it reiterated its commitment to convergence. In particular, the NIVRA notes that in order to further improve ongoing convergence with IAASB pronouncements in Dutch professional practice, the NIVRA will review existing requirements and prepare an action plan for amendments where necessary. It has also instructed members on the availability of the clarified ISAs effective in the Netherlands beginning December 15, 2009. The NIVRA in collaboration with the relevant EU bodies is also translating the updated ISAs, with the translation likely to be completed by October 2009, the action plan notes.

IDAnti-Money Laundering/Combating Terrorist Financing Standard

A 2007 U.S. Department of State (DoS) report noted that the Netherlands is compliant with the Financial Action Task Force's (FATF) recommendations and special recommendations on Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) with respect to both legislation and enforcement. The report also notes that the Netherlands complies with the European Union's Third Directive on Money Laundering. However, the latest report (2009) by the U.S. DoS does not make any mention as to the Netherlands compliance with the FATF's requirements. Furthermore, the 2007 DoS did not address the Netherlands' compliance with each individual FATF recommendation and special recommendation. The 2009 U.S. DoS report confirms that the Netherlands has a comprehensive legislative framework with regards to AML practices. Furthermore, a new Prevention of Money Laundering and Financing of Terrorism Act (Wwft) came into force on August 1, 2008 which institutes a more risk-based approach. The Netherlands’ Financial Intelligence Unit (FIU-NL) is a member of the Egmont Group and mandates suspicious transaction reporting by all supervised entities. Despite these initiatives, the 2009 DoS report notes that, in June 2008, the Netherlands Court of Audit published its findings on the government of Netherlands’ AML/CFT regime, pointing out lack of information sharing amongst relevant authorities; little use of the asset seizure powers; limited financial crime expertise and capacity; and inadequate supervision of notaries, lawyers, and accountants. The Netherlands is a member of the FATF. The FATF, in its 2008-2009 Annual Report, named the Netherlands as one of the jurisdictions that have endorsed the FATF's 40+9 recommendations.

CPCore Principles for Systemically Important Payment Systems

TARTET2-NL, the Dutch component of the European Union's Trans-European Automated Real-time Gross settlement Express Transfer system (TARGET2), is the systemically important payment system (SIPS) in the Netherlands. It replaced the former SIPS, TOP, on February 18, 2008, when the Netherlands migrated from TARGET to TARGET2. TARGET2 provides harmonized payment services under a single shared platform across its member countries. In May 2009, the European Central Bank (ECB) came out with an assessment of TARGET2's design against the Core Principles for Systemically Important Payment Systems (CPSIPS) developed by the Committee on Payment and Settlement Systems. The report concludes that TARGET2 fully observes all relevant CPSIPS, although it does make certain recommendations with regards to Principles III and VIII. It is generally believed that the system is an improvement over its predecessor, TARGET and its component systems. The ECB in its function as the overseer of TARGET2 aims to ensure continued compliance of the system with the CPSIPS, and will continually monitor the implementation of its recommendations by the system. In addition to TARGET2-NL, the Dutch central bank also oversees the securities settlement systems and retail payment systems. The Clearing and Settlement System (CSS) was assessed in 2005 by the ECB and identified as a Systemically Important Retail Payment System (SIRPS). The ECB, in its 2005 report, concludes that the CSS fully observes eight out of the ten Core Principles, broadly observes CP I, and finds that CP V is not applicable to the system. Based on the results of the World Bank’s 2008 Global Payment Systems Survey, Cirasino and Garcia’s 2008 report evaluates the Netherlands payment systems and remarks that the country has a well functioning system in place.

CPCore Principles for Effective Banking Supervision

* 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 (compliant with 24 of the 30 BCPs and sub-principles, and largely compliant with the remaining 6). The assessment also noted that many of its recommendations were, according to the authorities in the Netherlands, expected to be addressed in the bill on financial supervision that came into force in 2007 as the Financial Supervision Act (Wft). The 2007 Article IV report by the IMF noted that the banking sector in the Netherlands was generally strong and stable, with a capacity to withstand adverse macroeconomic shocks. The report commended the country's risk-oriented, cross sectoral supervisory framework, which represented international best practice. In 2008, in the wake of the global financial crisis and the ongoing recession, the IMF found banks healthy, in part due to good supervision and robust initial conditions. However, the most recent IMF report (in November 2009) expresses concern over the deteriorating condition of Dutch banks in terms of capital and asset quality and advises the country to strengthen the regulatory and supervisory framework , especially with respect to capital standards, credit policies, and executive compensation practices. Despite the positive assessment by the IMF in 2004 and subsequent reports indicating an overall strong financial sector in the Netherlands, there is scant information publicly available addressing the effectiveness of the Wft in implementing the BCPs. According to the Dutch central bank website, the Wft is the current law governing financial supervision in the country. The Wft replaced earlier laws pertaining to financial supervision in the country, specifically the 1992 Act on the Supervision of the Credit System for the banking sector. The 2007 IMF report applauds the Netherlands as a frontrunner in implementing international standards such as Basel II and International Financial Reporting Standards.

CPObjectives and Principles of Securities Regulation

According to the IMF's 2004 Financial System Stability Assessment, the Dutch securities regulatory system is mostly in compliance with International Organization of Securities Commissions (IOSCO) Objectives and Principles of Securities Regulation. Specifically, according to the IMF’s 2004 detailed assessment, the Netherlands has fully implemented 24 of the 30 IOSCO Principles, broadly implemented three, partly implemented one, and has not implemented one IOSCO Principle. Principle 30 was not assessed, since the securities settlement system was separately assessed against the Committee on Payment and Settlement Systems (CPSS)/IOSCO Recommendations for Securities Settlement Systems. The IMF attributed the effective regulation to a strong regulatory body with the necessary powers to carry out its responsibilities and an increasingly risk-based regulatory approach. At the time of the assessment, a new law on financial supervision was expected to largely complete the ongoing regulatory transformation and address the few departures from IOSCO Principles. 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 have been improvements in financial firms' supervision and risk management practices. Also, the supervisory framework and quality of supervision mostly represent international best practices.

CPInsurance Core Principles

The 2004 Financial System Stability Assessment (FSSA) by the IMF also found a high level of observance of the Insurance Core Principles (ICPs) in the Netherlands and observed that the country met the conditions necessary for effective insurance supervision. The FSSA recommendations chiefly pertain to the 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 held 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 prudential supervisor of the financial sector, while the AFM continues to supervise the conduct of business. Although, there are no subsequent assessments of the DNB as the new insurance supervisor, subsequent IMF reports describe the financial sector in the Netherlands as sound and well-supervised, and commend the country for implementing many of the 2004 FSSA recommendations. The Netherlands, per recent reports, is also part of euro area efforts to strengthen cross-border supervision of insurance conglomerates as a response to the global financial crisis.

Business Indicators

With an overall score of 10.98/12, the Netherlands is at standard on the economic, legal, and political indicators that make up our Business Index. The Netherlands has a market-based economy. Even though the Dutch economy is based on the private sector, its public sector is nonetheless important. This role has been significantly reduced since the 1980s, and privatization of state owned industries has become the general policy. The Dutch government encourages foreign investment, provides investors with a very favorable investment climate, and offers them national treatment except in the air transport sector. However, certain industries constitute public or private monopolies that exclude all investors, both foreign and domestic. Property rights and contract laws are fully established. Corruption is of no concern to investors, as reflected in the Netherlands’ ranking of 6th out of 180 countries in Transparency International’s 2009 Corruption Perceptions Index.

Global Indices & Quick Facts

The Netherlands are ranked in the 1st quintile in all global indices benchmarking political, economic, business, and human capital climates, as shown below. The country is characterized by a well-functioning democratic and market-based economy with low corruption. Economic freedom in the Netherlands is enhanced by low inflation and a highly developed financial sector. In addition, the country ranks in the top ten for capital access. One drawback is that total government spending amounts to almost half of GDP. Meanwhile, restrictive labor market regulations are considered to be the most problematic factor for doing business, as highlighted by the Global Competitiveness Index. The Netherlands ranks very high on the UNDP’s Human Development Index, where it places in the top five for gender equality.

Name	Year	Rank	Score	Quintile
Bertelsmann Transformation Status Index	2010
Heritage Foundation Economic Freedom Index	2010	15/179	75.0%	1
Economic Freedom of the World Index	2009	20/141	7.56/10	1
World Economic Forum Global Competitiveness Index	2009	10/133	5.32/7	1
Milken Institute Capital Access Index	2009	7/122	7.28/10	1
World Bank Ease of Doing Business Index	2009	30/183	N/A	1
UNDP Human Development Index	2009	6/177	0.96/1	1
Transparency International Corruption Perceptions Index	2009	6/180	8.9/12	1
Freedom House Index	2009	Free	1/7

Credit Ratings

AAA/Stable Fitch

Aaa/Stable Moody's

AAA/Stable Standard & Poor's

Macroeconomic Data

2009 GDP (Current Prices): 789.7 billion USD (IMF)

2009 GDP (Per Capita): 47,042 USD (IMF)

2010 GDP (Growth Forecast): 0.7% (IMF)

2009 Inflation (CPI): 0.9% (IMF)

2008 Unemployment: 4.0% (CIA)

2008 Foreign Direct Investment

FDI (Inward): -3.5 billion USD (UNCTAD)

FDI (Outward): 57.60 billion USD (UNCTAD)

2007 Official Development Assistance

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

ODA (Disbursed): 6,224 million USD (OECD)