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IMF/Bank of Israel Financial Sector Conference

IMF/Bank of Israel Financial Sector Conference. ISRAEL’S CAPITAL MARKET REFORMS: Supervisory Approaches and Managing Change: The Dutch Approach By Arthur Docters van Leeuwen. Reasons. The system changed March 1st 2002. From three to two (DNB and AFM) Reasons fundamental:

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IMF/Bank of Israel Financial Sector Conference

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  1. IMF/Bank of IsraelFinancial Sector Conference ISRAEL’S CAPITAL MARKET REFORMS: Supervisory Approaches and Managing Change: The Dutch Approach By Arthur Docters van Leeuwen

  2. Reasons • The system changed March 1st 2002. • From three to two (DNB and AFM) • Reasons fundamental: • The Wallis Report (Australia). • Reasons specific: • 80% of all financial business is provided for by four (now three) big financial institutions. • Rapid development of conduct of business regulation.

  3. How did we do it? • First: change of mandates within existing legislation. • Later: a fundamental review and expansion of the legislation (WFT). • Instruments: • Council of financial regulators; • Move personnel from the one to the other; • Steering committees, project groups.

  4. Difficulties • Who has the power to give permits? (and how is it possible for the one to influence the other) • In consultation or after consultation? • Who’s turf is the AO/IC?

  5. How to manage the system • Covenant: • No overlap • Adjustment of inspection plans • Consultation about serious measures • Crisis management • Two directors responsible, every half year meetings of two boards • Rule for the two CEO’s: use the hotline!

  6. Management of the environment • Internal may be the hardest part, old ways and bureaucratic enmities die hard. • Market participants: why change? We like our “old” regulator. • Ministry: a distant yet concerned approach, very disciplined concerning principles.

  7. Tips • Not too much overlap: both regulators, need their own territory. • Maintain very good informal relations at the top and show it. • Show time and again that both really want this system to work.

  8. Costs and Benefits Costs: • Enormous amount of work • Is the system fundamentally stable? Benefits: • More simple, less overlap • Better focus, improvement of professionalism (prudential versus conduct of business) • Sharpens the mind!

  9. Conclusion • Nobody in the Netherlands wants to go back to the old system of three regulators. • The jury is out on the question whether we should merge into one regulator (FSA model). That depends on developments in Europe and the world. • The Dutch, market participants, regulators and politicians are happy with the new system.

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