Consolidated scope for Policy Rule on Concentration Risk

Factsheet

Read aloud

The applies to banks and investment firms on both the solo and the consolidated level. When applied at the consolidated level, it is important that the Policy Rule allows exposures entered into by subsidiaries to be netted against borrowings in the same market This is in line with the standard consolidated treatment of credit risk on the parent company’s balance sheet.

Published: 01 December 2011

The Policy Rule must be applied at both the consolidated and the solo level. The calculation of gross country exposure on the consolidated balance sheet may disregard exposures of the subsidiary that have been funded out of locally acquired funds. Solo level – Application at the solo level means that a material concentration of direct exposures to residents, and exposures of the supervised institution to a subsidiary in a country with nonnegligible country risk, must satisfy the Policy Rule (Section 1, under d, read in conjunction with Section 2). Any exposures of the foreign subsidiary to third parties resident in the same country, and funding raised by the subsidiary in that same country, do not appear in the solo balance sheet of the supervised institution and are therefore ignored. Consolidated level – In order to determine the size of the material concentration of exposures to a country with a nonnegligible country risk, total exposures to that country are reduced by total funds raised in that country by the same subsidiary – independently, so without recourse to the group. After all, if a country risk event (as defined in the Policy Rule) occurs, the resulting exposure of the Dutch-resident supervised institution is limited to the country risk ensuing from the direct exposures to the subsidiary in question. The rest of the loans provided by the subsidiary are ‘covered’ by locally acquired funding.

Explanatory notes – solo level

In the example below, solo supervision of the parent looks at the foreign subsidiary only insofar as the parent’s capital participation and parent's the loan to the subsidiary are concerned. The gross exposure to the subsidiary under the Policy Rule is 300. Note however, that if the other 2700 in exposures held by the parent contain elements that have to be added to the said 300, and the total must remain within the applicable thresholds under the Policy Rule.

You can swipe the table to see more columns.

Parent P

Subsidiary S

Holding in S

100

Equity capital

1000

Credits

1000

Equity capital

100

Loan to S

200

Borrowed cap

2000

Loan fr. P

200

Other

2700

Other borrowed cap.

700

3000

3000

1000

1000

Explanatory notes – consoldiated level

The supervised institution must also comply with the Policy Rule on a consolidated basis. Here, the balance sheet look like this:

You can swipe the table to see more columns.

P – Consolidated

Loans P

2700

Eq. cap.

1000

Loans S

1000

Bor. cap. P

2000

Bor. cap. S

700

3700

3700

At first sight, the gross exposure under the Policy Rule would appear to be 1000 (again, not counting possible nonnegligible country risks under the Policy Rule as part of the parent’s exposures of 2700). However, because the subsidiary has raised 700 in local funding, that part of the exposure may be used to cover the local exposures and be disregarded here. This again leaves a gross exposure of 300. The following example serves to explain that the gross exposure to a subsidiary in a particular country may only be reduced by the amount of funding raised by the subsidiary in that same country. Subsidiary S is located in a country with a nonnegligible country risk. Therefore the exposures to that country are subject to the Policy Rule. Another subsidiary of the supervised institution, T, provides some of the funding of subsidiary S.

You can swipe the table to see more columns.

Parent P

Subsidiary S

Holding in S

100

Equity capital

1000

Credits

1000

Equity capital

100

Loan to S

200

Borrowed cap.

2000

Loan fm. P

200

Holding in T

50

Loan fm. T

40

Loan to T

75

Other

2575

Other borrowed cap.

660

3000

3000

1000

1000

Subsidiary T

Loan to S

40

Eq. cap.

50

Credits

360

Loan fm. P

75

Other bor. cap.

275

400

400

The consoldidated balance sheet for the abover situation looks as shown. Since part of the credits extended by subsidiary S to parties in a country with a nonnegligible country risk is funded by subsidiary T, the amount of locally funded exposures is smaller and the gross country risk exposure on the consolidated balance sheet is higher (340 instead of 300 – under the same proviso regarding country risk thresholds [1]. The funding provided by subsidiary T to subsidiary S must not be deducted when caclulating the gross exposure of S. If a country risk event occurs, subsidiary S cannot be assumed to be able to meet its obligations to T. Therefore the event may affect the consolidated balance sheet.

You can swipe the table to see more columns.

Consolidated

Credits P

2575

Eq. cap.

1000

Credits S

1000

B. cap. P

2000

Credits T

360

B. cap. S

660

B. cap. T

275

3935

3935

Footnotes

[1] The 360 in credits are assumed to have been extended by subsidiary T in the country where it is located. This country is assumed to lie outside the scope of the Policy Rule.

Downloads

Stcrt 2010 11135 - Beleidsregel behandeling concentratierisico opkomende landen (Refers to an external site)

Base law

Artikel 1:29A Wft
(Refers to an external site)

Artikel 3:17 Wft
(Refers to an external site)

Artikel 3:268 Wft
(Refers to an external site)

Artikel 3:274 Wft
(Refers to an external site)

Artikel 23 Bpr
(Refers to an external site)

Artikel 24A Bpr
(Refers to an external site)

Artikel 25a Bpr
(Refers to an external site)

Discover related articles

Factsheet

Banks

Share:

Share on LinkedIn

Share on X

Share on Facebook

Share via Email

Interesting articles

Prudential rules do not hinder bank financing for EU priorities

17 July 2026

News item supervision

Europe faces historic investment challenges, in which banks will play an important financing role. Prudential requirements strengthen banks’ resilience, without posing a major obstacle to their financing. Unlocking more private finance requires better risk-sharing and deeper financial integration.

Read more
Prudential rules do not hinder bank financing for EU priorities

News item supervision

17 July 2026

DNB Inhouse Day for the Dutch banking sector: financial crime supervision

16 July 2026

News item supervision

Following last year’s successful event, De Nederlandsche Bank (DNB) will again host an Inhouse Day for AML/CFT professionals in the Dutch banking sector. The event is designed to encourage dialogue and provide further insight into DNB’s AML/CFT supervision.

Read more
DNB Inhouse Day for the Dutch banking sector: financial crime supervision

News item supervision

16 July 2026

Fine for ABN AMRO Bank N.V. for inadequate customer due diligence for high-risk customers

09 July 2026

Enforcement measures

De Nederlandsche Bank (DNB) imposed an administrative fine of €8.5 million on ABN AMRO Bank N.V. (ABN AMRO) on 6 July 2026 due to serious shortcomings in its anti-money laundering controls in the period from September 2023 through September 2024.

Read more
Fine for ABN AMRO Bank N.V. for inadequate customer due diligence for high-risk customers

Enforcement measures

09 July 2026

De Nederlandsche Bank publishes ‘Integrity Supervision in Focus 2026’

25 June 2026

News item supervision

In the third edition of ‘Integrity Supervision in Focus’ (ISF), we share the key insights from our integrity supervision.

Read more
De Nederlandsche Bank publishes ‘Integrity Supervision in Focus 2026’

News item supervision

25 June 2026

Necessary cookies

To ensure the proper operation of the website, De Nederlandsche Bank (DNB) uses functional cookies and analytics cookies, and has taken measures to ensure that these cookies have little or no impact on the privacy of website users.

Optional cookies

Some pages include embedded content from external websites. These websites may use proprietary (tracking) cookies. This allows third parties to track visitor statistics, show personalised content and display targeted ads, for example.

You can make your choice about allowing these optional cookies both when you first visit the website and when you navigate to a page with embedded content.