On 5 September 2012, the Dutch Minister of the Interior and Kingdom Relations published the "Policy rules on the use of derivatives by approved public housing institutions". These policy rules, which will enter into effect on 1 October 2012, aim to ensure that housing associations use derivatives properly and responsibly. To that end, the policy rules contain rules concerning:

  • the characteristics of derivatives that may be used by housing associations;
  • the documentation of derivatives used by housing associations;
  • the financial institutions with which housing associations may enter into derivatives;
  • and the housing association itself.

Characteristics of derivatives

A housing association may only use derivatives in the form of interest rate caps or interest rate swaps which hedge the upward interest rate risks under loans existing at the time the relevant derivative is entered into. Derivatives must be denominated in euro. The duration may not exceed the current calendar year plus nine subsequent calendar years.


Derivatives contracts entered into by a housing association may not contain clauses that can hinder the association's external supervision. According to the explanatory notes to the policy rules, an example of such a clause is one entitling the financial institution to early termination of the derivatives contract or to demand additional collateral if intervention measures are taken.

A housing association must reduce positions under derivatives contracts that do not comply with the above requirement in accordance with an action plan to be drawn up for that purpose. The Central Fund for Social Housing (CFV) may review this action plan.

The Minister will, after consultation with banks, publish a model ISDA Master Agreement. Under the policy rules, all derivatives entered into with housing associations will have to be documented in accordance with this model upon the publication thereof.

Financial institutions

A housing association may only enter into derivatives with financial institutions holding at least a single-A or equivalent rating from two of the three rating agencies Moody's, Standard & Poor's and Fitch. Furthermore, the financial institution must have classified the housing association as a "non-professional investor".

Housing association

A housing association that uses derivatives must have a suitable internal organisation. This means, for instance, that sufficient in-house expertise must be guaranteed. In addition, a housing association that uses derivatives is subject to certain financial rules. One such rule requires the housing association to maintain a liquidity buffer that can absorb the effect to the housing association's liquidity position of a fall in the interest rates of 2 percentage points. Finally, the policy rules contain rules regarding the external auditing and supervision of the housing association's use of derivatives.

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.