By Archie van Riemsdijk
The Dutch banking industry, dominated by just a few large banks,
needs to become more diverse, more competitive and smaller than it
is now, the Dutch central bank said Thursday, in a review of the
sector.
The three major Dutch retail banks--Rabobank, ING and ABN
Amro--have diversified their activities over the past decades, but
each did so in exactly the same way, Jan Sijbrand, the director of
banking supervision at the central bank, said.
"When one of them entered the U.S. mortgage market, they all
did. If one of them bought a Polish bank, they all did. If one of
them started a leasing company, they all did," he said. This
behavior seemed inspired by the idea that it's not a problem to
fail in a particular market, as long as major rivals failed too,
Mr. Sijbrand added.
As a result, all three banks would be affected, if one of their
markets were to run into trouble. "One might ask, what good this
type of diversification brings," said Mr. Sijbrand.
One of the reasons to increase competition in the Dutch retail
banking, is that the major banks behave as a typical oligopoly, Mr.
Sijbrand said. This means they only make a move, when their market
share is under pressure. "If market shares are stable, they don't
feel a need to grow it by lowering prices. This means margins
remain high," he added.
The Dutch central bank aims to shrink the size of the Dutch
banking industry, notably its large residential mortgages
portfolios which surged in the decades before the financial crisis,
by removing fiscal and other stimuli.
At the same time, foreign and innovative lenders are welcomed to
enter the Dutch market, the regulator said.
Write to Archie van Riemsdijk at archie.vanriemsdijk@wsj.com