Netherlands: Entry Into Force Of Intervention Act In The Netherlands

On 13 June 2012 the Financial Institutions (Special Measures) Act (Wet bijzondere maatregelen financiële ondernemingen; "Intervention Act") entered into force with retro-active effect as of 20 January 2012). The Intervention Act includes new powers for the Netherlands Central Bank ("DNB") to procure that a bank or insurer which is experiencing serious financial problems is transferred, in whole or in part, to a third party. The Minister of Finance is granted extensive powers to intervene in the affairs of financial institutions if this is necessary to safeguard the stability of the financial system. In order to increase the efficacy of these special measures the Intervention Act contains provisions restricting the contractual rights of counterparties of (i) a bank or insurer that is or has been subject to one of those measures, or (ii) an entity that belongs to the same group as such bank or insurer. The Invention Act precedes the envisaged introduction of an EU Directive establishing a framework for the recovery and resolution of banks and investment firms, a proposal for which was published on 6 June 2012.

Introduction

The Intervention Act grants two new categories of far-reaching statutory intervention powers to DNB and the Minister of Finance with regard to financial "problem institutions" (probleeminstellingen):

  1. A new chapter – Chapter 3.5.4A, "Transfer" – is added to the Act on Financial Supervision (Wet financieel toezicht, "AFS") granting DNB powers to procure that a bank or insurance company which is experiencing serious financial problems is transferred, in whole or in part, to a third party.
  2. In order to safeguard the stability of the financial system, the Minister of Finance is granted extensive powers to intervene in the affairs of financial institutions, including banks or insurance companies. These powers are included in the Intervention Act as a new Part 6 of the AFS entitled "Special measures regarding the stability of the financial system".

To increase the effectiveness of the supplementary measures set out therein, the Intervention Act also adds another new chapter to the AFS – Chapter 3.5.8 – entitled "Post-event counterparty rights". This chapter restricts certain rights of the counterparties of a bank or insurance company (or a company belonging to the same group), after the bank or insurance company has been subjected to one or more of the measures set out in the Intervention Act.

Transfer regime: resolution of a distressed bank or insurance company

The Intervention Act authorises DNB to procure the transfer of a bank or insurance company experiencing serious financial problems ("problem institutions"). This applies both in the absence of emergency regulations or bankruptcy, as well as where either of these has been ordered. If DNB concludes that a bank or insurance company is a problem institution, it can initiate a transfer of all or part of that institution by preparing a transfer plan.

The Intervention Act distinguishes three types of transfer that DNB may prepare:

  1. (in the case of a bank) a transfer of deposit agreements, in which context the explanatory memorandum notes that this would "usually" be financed with funds from the deposit guarantee scheme;
  2. a transfer of other assets or liabilities; and
  3. a transfer of shares in the problem institution.

A bank or insurance company will be considered a problem institution if the following composite criterion is met:

  1. there are signs of a dangerous development regarding the institution's equity capital, solvency, liquidity or technical provisions; and
  2. there is a reasonable probability that this development cannot be sufficiently reversed or cannot be reversed in a timely manner.

This criterion is based on the benchmark presently used for applying emergency regulations to banks under the current Section 3:160 of the AFS, but has a wider scope. Under the Intervention Act, the criterion will also be used for the application of emergency regulations to a bank or insurance company and for subjecting it to bankrupty.

If DNB prepares a transfer plan, it may notify the relevant problem institution of that fact, but is not obliged to do so. In the event of notification, the relevant institution and its corporate bodies and representatives must cooperate in the preparation of the transfer plan. In addition, after the notification, DNB can require the institution to provide the necessary information to certain third parties, such as a potential acquirer or experts assisting DNB with preparing the transfer plan.

The actual implementation of a transfer plan prepared by DNB would begin by DNB submitting a request with the district court to approve the plan and declare that one or more of the following regimes apply: the emergency regulations, the bankruptcy regime or the transfer regime (overdrachtsregeling) as provided for in the Intervention Act. In this regard, the explanatory memorandum states that if the transfer plan relates to deposit agreements or other assets or liabilities, DNB will "in most cases" request application of the emergency regulations or the bankruptcy regime, whereas the transfer regime is the obvious choice if the transfer plan relates solely to shares in the problem institution.

The district court can only withhold approval of the transfer plan if the plan fails to satisfy a number of pre-conditions regarding its contents or if the transfer price included in the plan (or the method for determining that price) is unreasonable. In the case of a transfer of assets or liabilities, the district court can also withhold its approval if the transfer would be detrimental to the problem institution's remaining creditors.

Through the judicial approval of the transfer plan and the judgment declaring the transfer regime applicable, the relevant shares, deposit agreements or other assets or liabilities will be transferred to the acquiring party, unless the transfer plan provides otherwise. In the same judgment, the district court will also appoint one or more "transferors". The judgment will, by operation of law, deprive the problem institution of its powers of disposal and management over the portion of its assets to which the transfer plan pertains. The shares, deposit agreements or other assets or liabilities covered by the transfer plan that have not already been transferred through the court's judgment will be transferred by the court-appointed transferor(s) to the acquiring party or parties.

Interventions intended to safeguard the stability of the financial system

The Intervention Act includes a new Part 6 of the AFS that will grant two new powers to the Minister of Finance in the interest of safeguarding the stability of the financial system. If the Minister is of the opinion that that stability would be "in serious and immediate danger as a result of the situation of a financial institution having its seat in the Netherlands", he may:

  1. take "immediate measures" (onmiddellijke voorzieningen) regarding the relevant institution; or
  2. proceed to expropriate the assets of, or shares in, the institution.

In both cases the Minister of Finance may, if necessary, deviate from statutory provisions or provisions in articles of association. Furthermore, the Minister must consult DNB in advance and, given the importance of the step(s) to be taken, take the decision in agreement with the Prime Minister.

The explanatory memorandum gives the following as examples of immediate measures: the temporary suspension of shareholder voting rights, deviation from the articles of association and suspension of a management board or supervisory board member. The power of expropriation is intended to be invoked as a last resort and may only be used if immediate (or other) measures would not work, would no longer work, or would be insufficient. In accordance with Section 14 of the Netherlands Constitution (Grondwet), expropriation under the new Part 6 of the AFS would only be permitted in the public interest and in exchange for compensation.

Post-event restriction of counterparty rights

Interventions by the authorities for the purpose of safeguarding the continuity of a financial institution may, in some cases, constitute an event of default, a notification event or a cross default clause under the terms of that institution's current contracts, such as a Master Agreement, and could lead to early termination of those contracts or to the counterparty's becoming aware of the preparation for or taking of such a measure.

The explanatory memorandum to the Intervention Act notes that the exercise of such acceleration and early termination rights and the notification of counterparties could have a negative impact on the effectiveness of the measures set out in the Intervention Act. The core of the proposed new Chapter 3.5.8 of the AFS is that such rights cannot be exercised, and the financial institution's obligations to notify cannot be invoked, to the extent those rights and obligations are "triggered" by the taking of one of the proposed new measures or the submission of a request to that end. This also covers acts and events that are connected to such a measure or request.

The question is therefore if an event, such as a downgrade, which may be a subsequent result of the intervention measure could constitute a trigger. In the Parliamentary History to the Intervention Act, the Minister has stated in this respect that contractual early termination rights on which a counterparty can independently rely remain unaffected. As an example the Minister states that if DNB prepares a transfer plan, and at the same time - with a view to the financial position of the financial institution - a down grade takes place, the counterparty may use a down grade trigger event as a default clause (without the permission of DNB). This is different according to the Minister if the down grade is a direct consequence of the intervention by DNB or the Minister.

We note that on the basis of the Intervention Act the restriction on applicability of trigger events is irrespective of the law applicable to the agreement containing the trigger events which are affected.  

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
De Brauw Blackstone Westbroek N.V.
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
De Brauw Blackstone Westbroek N.V.
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions