Johannes de Jong Head of Financial Regulatory of Osborne Clarke's Amsterdam office:

For the Dutch banking sector, 2024 promises to be a transformative year marked by regulatory changes and technological advancements, with artificial intelligence (AI) playing a pivotal role. The integration of generative AI, particularly in fintech, will be a prominent feature, with innovations such as chatbots facilitating natural language communication between customers and banking apps. Major Dutch licensed banks, including ING and ABN are already embracing generative AI initiatives.

The year will also challenge the banking sector in newways as banks encounter new obstacles because of economic difficulties, which place addition pressure on the sector. In 2023, global uncertainties, particularly due to the war in Ukraine and tensions in the Middle East, significantly influenced the Dutch economy.

Also, Dutch banks examining the impact of continued high interest rates on their business models and resilience in recovering from economic shocks. On top of that, the demise of Credit Suisse in 2023 has impacted the banking regulation and supervision in 2024 as the forced takeover of Credit Suisse by UBS, raised questions about the quality of European Union supervision and the management of liquidity risks.

Failure of two major banks (although not Dutch banks), in 2023 highlighted that the mere existence of the regulatory measures put in place after the global crisis in 2008 is not enough to prevent a crisis for the banking sector and there should be ongoing awareness to strengthen our resilience.

Opportunities and challenges

Looking ahead to the challenges and opportunities of 2024, "platformification", fintech and embedded-banking trends are on the rise, with significant growth in the market. Electronic money institutions and fintech clearing banks are obtaining licenses in Europe, while established banks expand services to include embedded banking in their business model. This trend is expected to foster partnerships and innovation in the Dutch financial sector in 2024.

Undoubtedly, digital transformation will be an ongoing area of investment for the banking sector. The Digital Operational Resilience Act (DORA) aims to bolster the digital operational resilience of the financial sector and requires banks to implement effective digital risk management practices. The Dutch Central Bank (De Nederlandsche Bank, DNB) has already started monitoring Dutch-licensed banks' compliance with DORA's provisions, focusing on their capacity to manage information and communications technology-related disruptions.

Additionally, the Markets in Crypto-Assets Regulation (MiCAR) is set to transform the crypto-assets market in the European Union (EU), presenting strategic decisions for banks regarding involvement and understanding exposure. However, unlike banks in some other jurisdictions, Dutch-licensed banks have shown limited interest in offering crypto-asset services. The full impact of MiCAR on banks is yet to be seen and might become more evident in 2024.

The banking sector also anticipates major regulatory updates with the implementation of the Capital Requirements Regulation (CRR) and the Capital Requirements Directive (CRD VI), which are expected to come into effect in January 2025. These updates will introduce significant changes to the regulatory framework, impacting various aspects of banking operations and risk management.

The coming years environmental, social and governance (ESG) considerations will also continue to take centre stage, with the integration of climate and environmental risks into banking supervision. Dutch-licensed banks – both significant and less significant institutions – do now face the obstacle to align their ESG practices with the principles of prudent management of climate and environmental risks within the communicated deadlines – or they risk facing enforcement measures in 2024. The integration of the climate and environmental risks remains a challenge for banks as currently no Dutch-licensed bank – in line with banks in the rest of the EU – has fully met the expectations of the European Central Bank's guide on these risks.

Supervisory focus

The 2024 supervisory regulatory focus will also remain on the anti-money laundering and combating the financing of terrorism (AML-CFT) and sanction regulations, with the DNB enforcing heightened compliance. Notably, at least one bank successfully challenged the DNB's positions on AML-CFT and sanctions implementation in 2023, suggesting a growing trend where challenging the regulator could yield favourable outcomes.

In October 2023, the DNB launched a new proposal on the AML approach for financial institutions and other stakeholders, which advocates a more risk-based approach and more effective crime-fighting capabilities in relation to AML-CTF. The DNB plans to release the final proposal document in early 2024. As well as local developments, a new framework is on its way and set to have a broad impact on the AML landscape with a new European supervisory AML authority "AMLA", an AML regulation "AMLR" and a new AML directive "AMLD6.

In conclusion, 2024 promises a dynamic year for Dutch banks. 

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