FSC: 'Financial Stability Outlook on Orange Code'

1 Financial Stability Committee Report – 20 March 2026 Representatives of the Authority for the Financial Markets (AFM), De Nederlandsche Bank (DNB), and the Ministry of Finance (FIN) meet within the Financial Stability Committee (FSC) to discuss developments regarding the stability of the Dutch financial system. The Netherlands Bureau for Economic Policy Analysis (CPB) participates in meetings as an external expert. A representative from the Ministry of Housing and Spatial Planning (VRO) was also present during discussions on the mortgage lending standards monitor, the affordable homeownership market monitor, and the housing market outlook. The President of DNB chairs the FSC. Three main topics were discussed during the meeting: (1) current developments and risks to financial stability, (2) financial sector regulation, and (3) the mortgage lending standards monitor, the affordable homeownership market monitor, and the housing market outlook.

1. Current Developments and Risks to Financial Stability The FSC notes that the Dutch economy and financial sector are thus far demonstrating resilience amid heightened geopolitical tensions and macroeconomic uncertainty. At the same time, uncertainty regarding the international economic outlook is increasing, driven in part by sharply rising energy prices, disruptions in global value chains, and tightening financial conditions. The conflict in the Middle East constitutes a major source of downside risks to economic growth and upside risks to inflation. The FSC explicitly characterizes this development as a supply shock, with potentially prolonged global effects. Higher and volatile energy prices, combined with uncertainty regarding the availability of raw materials and semi-finished goods such as fertilizers and helium, could lead to increased costs and production disruptions. Higher prices will erode household purchasing power. The ultimate macroeconomic and financial impact heavily depends on the duration, intensity, and geographic reach of the conflict. For instance, the latest baseline projections from the CPB1 and the ECB2 point to a relatively favorable inflation trajectory with gradually declining energy prices. Alternative scenarios indicate that prolonged higher energy prices could result in significantly higher inflation and lower economic growth.3 Regarding energy prices, the FSC notes that while gas prices have risen, they remain well below the 2022 peak. Conversely, gasoline and diesel prices have surpassed the 2022 peak. In light of potential policy measures, the FSC emphasizes that price interventions could undermine supply security and that government debt sustainability remains a key concern. Rising expenditures combined with higher financing costs could constrain fiscal space and increase sensitivity to interest rate shocks. Any compensation for rising energy prices must be targeted, temporary, and compliant with (European) fiscal rules. Financial markets have thus far operated orderly, with interest rate increases proceeding gradually despite periods of heightened volatility, particularly on energy and commodity markets. Meanwhile, corporate bond spreads remain low and equity valuations stay high, especially for technology- and AI-related companies. These elevated valuations increase market vulnerability to abrupt corrections, which could transmit to the real economy via wealth effects and financial institutions. The FSC is paying specific attention to the development of private credit markets and other forms of non-bank financing that have grown significantly in recent years. Alternative lending can, provided risks are well managed, form a valuable addition within the Savings and Investment Union, notably through private credit for companies with limited access to bank financing. However, there are currently visible signs of increasing credit and liquidity risks in private credit funds, driven in part by limited transparency, longer maturities, and lower tradability. The FSC also notes that cyclical sensitivity could increase private credit risks. For instance, an increase in outflows and withdrawal requests is already visible. The FSC has decided to discuss private credit risks in greater detail at the next meeting. The Dutch financial sector maintains robust capital and liquidity buffers. Banks, insurers, and pension funds are better positioned than during previous periods of financial stress. Nevertheless, the FSC considers it important to analyze vulnerabilities in a timely manner, including through stress tests and scenario analyses that explicitly incorporate real-economy effects. Continued attention remains essential for operational and digital resilience, particularly given geopolitical tensions and escalating cyber threats. 2
2. European Developments and Regulation The FSC discusses recent European initiatives in financial regulation and supervision. The FSC sees opportunities within the Savings and Investment Union to reduce barriers within the European internal market and enhance the efficiency, effectiveness, and consistency of supervision. For example, carefully structured centralization of risk-based supervision at the European level could offer significant benefits. The FSC acknowledges that the European banking system has become healthier in recent years and that further deepening of the banking union, including a European deposit guarantee scheme (EDIS), could contribute to financial stability. FSC members also see benefits in simplifying regulation, provided it does not come at the expense of financial institutions' resilience. The international context, including potential changes to the regulatory framework outside the European Union, remains a relevant factor. 3
3. Lending Standards Monitor, Affordability, and Housing Market Outlook The FSC discusses the joint lending standards monitor by DNB and AFM4, as well as the CPB monitor on affordable homeownership market affordability5 and the CPB study Housing Market Outlook6. The lending standards monitor shows that household vulnerabilities have gradually decreased since the introduction of statutory lending standards in 2013. Lower average loan-to-value (LTV) and loan-to-income (LTI) ratios have increased household shock resistance. At the same time, the monitor reveals a slight increase in LTV and LTI ratios for new mortgages since 2022, particularly among first-time buyers who more frequently utilize their maximum borrowing capacity. Consequently, financial stability risks persist, especially when combined with persistently high house prices. According to CPB analyses, the affordability of the homeownership market has deteriorated significantly in recent years. An increasingly smaller share of homes is affordable for households with average incomes, particularly in urban areas. The FSC agrees that easing lending standards does not solve the affordability problem and could lead to higher house prices and greater financial stability risks. Conversely, further tightening of lending standards could restrict short-term affordability. Prudent lending standards remain essential for ensuring financial stability, and changes to the lending standards framework are not currently opportune. Reducing structural vulnerabilities in the housing market requires a broad policy mix, including increasing housing supply. The FSC welcomes that financial stability considerations are now explicitly factored into the determination of lending standards, thereby implementing a recommendation from the International Monetary Fund (IMF Financial Sector Assessment Program, 2024). 4 7 The next FSC meeting will take place on 26 June 2026. FSC members intend to discuss private credit and stablecoins at that time. 7 See https://www.imf.org/-/media/files/publications/cr/2024/english/1nldea2024003.pdf.