News Update Financial Regulatory

Profit-sharing insurance, digitalisation and sustainability in the financial sector
4 April 2022

In this News Update, we discuss the Dutch Authority for the Financial Markets' ("AFM") guidance on profit-sharing insurance, the European Supervisory Authorities' ("ESAs") recommendations to ensure that the European Union’s financial services regulatory and supervisory framework remains fit-for-purpose in the digital age, recent publications on sustainability in the financial sector and the Dutch financial supervisors' notices to supervised institutions regarding the sanctions regimes. We further highlight some other financial regulatory publications issued since our last News Update was published.

AFM | Guidance on information provision; profit-sharing insurance

With profit-sharing (capital) insurance, the life insurer guarantees an insured capital, and in addition, the policy holder builds up part of the total expected final capital through 'profit sharing' by the life insurer. Profits have been low or negative mainly due to the persistently low interest rates. This led to capital problems for insurers that issued guarantees and indexation problems for pension funds. Where no such promise was made, however, these insurances often provide the policyholders with less than they initially expected. Some policyholders will therefore not achieve the expected final capital that will help repay their mortgage or provide a sufficient pension. To prevent foreseeable disappointments as much as possible, the AFM urges insurers to actively inform policyholders with a substantial mortgage or pension-related policy on the consequences of their choices, and to establish whether the information actually helped them.

The AFM drafted two documents that insurers can use to improve the (additional) communication with their customers: 'Guidance on the provision of information in general' ('Handvatten voor informatieverstrekking algemeen') that is product neutral and thus relevant as best practice for the entire financial sector, and 'Guidance on the provision of information about third-pillar pension products' ('Handvatten informatieverstrekking derdepijlerpensioenproducten') (both in Dutch only). The AFM announced that it will review the progress made in informing policyholders and implementing the additional actions to all insurers in the second quarter of 2022.

ESAs | Advice on digital finance and related issues, and warning on the risks of crypto-assets

In our day-to-day practice, issues on market access (what is a payment service, when do you attract repayable funds, when are you active in the Netherlands, are you an intermediary or do you only cooperate with one) and the cooperation within groups or with external intermediaries (outsourcing, concentration risk, conflicts of interest) are standard. These issues flow together in digital finance (e.g. online car sales combined with financing and insurance, with dealers in multiple countries). This creates a cloud of uncertainty for companies offering financial services, and each may need to deal with this differently even though the EU has a harmonised framework.

The ESAs (the European Banking Authority ("EBA"), the European Insurance and Occupational Pensions Authority ("EIOPA") and the European Securities and Markets Authority ("ESMA")) have now published a joint report (and a summary factsheet) responding to the European Commission’s ("Commission") call for advice on digital finance. The ESAs' proposals aim at maintaining a high level of consumer protection and addressing risks arising from value chains transforming, platformising and the new groups emerging that combine financial and non-financial activities ("mixed-activity groups"). The ESAs recommend rapid action to ensure that the EU’s financial services regulatory and supervisory framework remains fit-for-purpose in the digital age.

The proposals include:
  • a holistic approach to regulating and supervising of the financial services value chain;
  • strengthened consumer protection in a digital context, including through enhanced disclosures, complaints handling mechanisms, measures aimed at preventing the mis-selling of tied/bundled products, and improved digital and financial literacy;
  • further convergence in the classifying of cross-border services;
  • further convergence in addressing risks of money laundering and financing of terrorism in a digital context;
  • regulating and supervising mixed-activity groups effectively, including a review of prudential consolidation requirements;
  • strengthening supervisory resources and cooperation between financial and other relevant authorisation on a cross-border and multi-disciplinary basis; and
  • active monitoring of social media use in financial services.

The proposals build on existing research and already made proposals on piecemeal issues, that have not (yet) been picked up by the Commission, e.g. on the key concepts of the definition of credit institutions and group supervision dating as far back as 2014, built upon in 2017, and reiterated in 2020. It is hoped that the digital framework will lead to a further unified (binding) understanding on key concepts that will result in a clear framework, allowing each company to step forward confidently when offering financial services in the EU and the Netherlands.

Last month, the ESAs also warned consumers that many crypto-assets are highly risky and speculative. For most retail consumers, crypto-assets are not suitable investments or as a means of payment or exchange. The ESAs further noted that consumers should be aware of the specific risks of crypto-assets and related products and services. Consumers should carefully weigh up whether the risks are acceptable given their own preferences and financial situation. These include the risk of losing all the money invested; quick falling and rising of prices over short periods; scams, fraud, operational errors or cyberattacks; and having no rights to protection or compensation if things go wrong.

Sustainability in the financial sector

There has been a continuous stream of publications on sustainability in the financial sector. Many publications on this subject were recently published.

In the special publication 'Transparency on sustainability', the AFM presents the key takeaways from two round table meetings earlier this year on non-financial information in reporting. The key topic was transparency on the impact companies have on the climate, people, and society, and how these sustainability issues affect those companies. During the meetings, the lack of clear, uniform reporting standards for sustainability aspects were addressed. Though legislation on this front is still at the development stage, the AFM calls on companies not to wait but to provide clear and relevant non-financial information. We agree, especially as such practical experience on what can and cannot be done may help fine-tune the future binding rules.

The Sustainable Finance Platform's Working Group on Carbon Pricing commissioned the study 'The Impact of Carbon Pricing', concluding that a European or Dutch carbon tax would affect the Dutch economy in almost equal measure, but that an international tax would have a favourable impact. The study also indicates that introducing a carbon tax requires high quality data, including data on emissions at a granular level. Furthermore, a broader approach is needed to meet the targets of the Paris Climate Agreement.

In its roadmap to a circular economy in 2030 ('Roadmap Circulair Financieren 2030', only in Dutch; summary in English), the Circular Economy Working Group of the Sustainable Finance Platform proposes four concrete actions to make the financial sector a driver of the circular economy: factoring linear and circular risks into financing decisions, weighing circular metrics in financing, building up experience by closing landmark deals, and optimising and broadening the range of financing instruments. The working group calls on the financial sector to cooperate with customers, governments, regulators and supervisors on this.

ESMA published its 'Sustainable Finance Roadmap 2022-2024', identifying three priorities for its sustainable finance work:
  • tackling greenwashing and promoting transparency;
  • building national supervisors' and ESMA’s capacities in the sustainable finance field; and
  • monitoring, assessing and analysing Environmental, Social and Governance ("ESG") markets and risks.
ESMA intends to address these priorities with a comprehensive list of actions across the investment and financial market sectors. Several actions aim to fulfil the Commission’s 2021 Renewed Sustainable Finance Strategy.

ESMA also published a call for evidence on ESG ratings, aiming to develop a picture of the size, structure, resourcing, revenues and product offerings of the different ESG rating providers operating in the EU. The call is mainly addressed to ESG rating providers, users of ESG ratings and entities subject to rating assessments of ESG rating providers.

The European Central Bank ("ECB") published its 'Supervisory assessment of institutions’ climate-related and environmental risks disclosures', on the progress European banks have made on disclosing climate and environmental risks as set out in the ECB’s November 2020 guide. There is still no bank that fully meets the supervisory expectations, although there have been improvements since the ECB’s first assessment in late 2020.

AFM and DNB | Notices to supervised institutions regarding the sanctions regimes

The sanctions regimes were recently changed several times in response to Russia's actions to destabilise Ukraine. The Dutch financial supervisors, the AFM and the Dutch Central Bank (De Nederlandsche Bank, "DNB"), published several news items on the subject. These notices indicated what they expected in this respect from institutions under their supervision. In short, supervised institutions must:
  • check whether a regulation applies;
  • if a regulation applies, immediately follow up its orders and prohibitions: freeze the funds and/or economic resources and prevent the funds and/or economic resources from being made available, whether directly or indirectly, and refrain from providing prohibited financial services;
  • if the identity of a business relation matches that of a person or entity mentioned in the sanctions regulations (a “hit”), notify the supervisor immediately;
  • if the supervisor has any questions about the notification, answer them immediately; and
  • in certain cases, a "hit" can be regarded as an unusual transaction, as mentioned in the Anti-Money Laundering and Anti-Terrorist Financing Act (Wet ter voorkoming van witwassen en financieren van terrorisme). If that is the case, report the transaction to FIU-the Netherlands.

DNB also drew attention to an increased cyberthreat due to the situation in Ukraine and called on financial institutions to remain alert. DNB pointed out that many institutions and security providers warn of an increased cyberthreat to Western vital organisations from sophisticated Russian hackers. According to DNB, Dutch financial institutions also rate the threat in their sector as increased and are attentive to developments.

European supervisors have also spoken out. For example, EBA called on financial institutions to ensure compliance with sanctions against Russia following the invasion of Ukraine and to facilitate access to basic payment accounts for refugees. And ESMA stated that it is coordinating with national supervisors and closely monitoring the impact of the Ukraine crisis on financial markets. ESMA is prepared to use its relevant tools to ensure the orderly functioning of markets, financial stability and investor protection.

Other financial regulatory publications

We have highlighted a selection of other publications by legislatures and regulators for the financial markets and financial supervision since our last News Update was published.

Dutch Ministry of Finance
  • The Act on the allocation of powers and the verification of interest (Wet bevoegdheidstoedeling en renteverificatie, only in Dutch) entered into force on 3 March 2022; and
  • Consultation Draft decision implementing directives for investment firms and UCITS on sustainability risks and sustainability factors (Ontwerpbesluit implementatie richtlijnen voor beleggingsondernemingen en icbe’s inzake duurzaamheidsrisico’s en duurzaamheidsfactoren, only in Dutch).


  • Announcement that it sees no need to allow banks to operate below the level of capital defined by their Pillar 2 Guidance beyond December 2022, nor to extend beyond March 2022 the supervisory measure that allows them to exclude central bank exposures from their leverage ratios. DNB indicated to follow this decision concerning the less significant credit institutions under its direct supervision;
  • Results of its supervisory review and evaluation process for 2021; and
  • Guide on options and discretions available in Union law.


  • Final draft regulatory technical standards (RTS) on emerging markets and advanced economies under the Capital Requirements Regulation;
  • Opinion on the Commission’s amendments relating to the final draft RTS for own funds requirements for investment firms;
  • Step 1 and Step 2 methodology for the assessment of regulatory and supervisory equivalence of third countries;
  • Reports on the 2021 credit risk and market risk benchmarking exercises;
  • Report on supervisors responses to the 2020 Luanda Leaks;
  • Final guidelines on the limited network exclusion under PSD2;
  • Report in reply to the ESRB recommendation on identifying legal entities;
  • Report on developing a framework for sustainable securitisation;
  • Final Report on guidelines on common procedures and methodologies for the supervisory review and evaluation process and supervisory stress testing;
  • Final draft RTS on requirements that an internal methodology or external sources used under the internal default risk model are to fulfil for estimating default probabilities and losses given default; and
  • Report on competent authorities’ approaches to the anti-money laundering and countering the financing of terrorism supervision of banks.


  • Supervisory briefing on expectations on firms using tied agents in the MiFID II framework;
  • Simple, Transparent and Standardised Register for notifying securitisations under the Securitisation Regulation;
  • Peer review report on the supervision of cross-border activities of investment firms;
  • Assessment of the main elements on the Commission’s MiFIR review proposal;
  • Final Report on emission allowances and associated derivatives; and
  • Decision to extend the application of the recognition decisions under EMIR for the three central counterparties ("CCPs") established in the UK and announcement of a series of updates concerning the recognition under EMIR of CCPs established in a third country.

  • Decision to extend equivalence for UK CCPs until 30 June 2025;
  • Public consultation and call for evidence on ways to expand central clearing activities in the EU and improve the attractiveness of EU CCPs to reduce the EU's overreliance on systemic third-country CCPs; and
  • Consultation on options to enhance the suitability and appropriateness assessments.

Single Resolution Board

Basel Committee on Banking Supervision

If you have any financial regulatory questions, please do not hesitate to contact Berry van Wijk and Roel Theissen. For questions related to Investment Management, you can also contact our colleagues Oscar van Angeren and Marthe Bollen.


Written by:
Berry van Wijk

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