On July 1st, 2012 the Act on financial markets BES (Wet financiële markten – WfmBES) will enter into force. Briefly, this law regulates the supervision of financial institutions in the Dutch Caribbean. The supervision on behavior is carried out by the Financial Markets Authority (AFM). Michael Denkers, head of the Supervision Department of AFM, explains in this article what the AFM stands for and what the population will notice of the WfmBES.
The AFM is the supervisory authority for financial markets in the Kingdom, thus also in the Dutch Caribbean. Supervision means to monitor whether companies and individuals on the financial markets comply with the laws and regulations. And if they behave in line with those regulations. These are laws and regulations for financial companies such as banks, insurers and insurance brokers. Examples of financial products are insurance, savings accounts and loans. Financial service providers must be knowledgeable, reliable and honest. They also have a duty of care. That means that they have to deal in a careful way with their customers. They have to give all the relevant information which is necessary for the client to make a choice. The information must be accurate, clear and not misleading.
"We are already conducting behavior supervision on some of the financial institutions in the Dutch Caribbean, but on July 1st this year, this will apply to all institutions", says Michael Denkers, Chief Supervision Group Financial Companies. "That is because the Act financial markets BES (WfmBES) will enter into force."
About thirty to forty financial institutions in Bonaire, Sint Eustatius and Saba will have to deal with this supervision. At the moment, about ten banks and twelve insurance agents are being supervised. A number of insurers and credit unions will be added by July 1st.
It is not possible yet to say precisely what the Dutch Caribbean people will notice. Therefore it is still a little early. "I do not have a clear picture of the situation in the Dutch Caribbean. But we already have been several times on the islands and we certainly looked around. We already anticipate that a number of areas will need to change." Denkers points out for instance the principle of ‘suitable advice’: an insurance adviser should give advice that fits the needs of the customer. But that does not always happen. "Until a few years back this was also a problem in the Netherlands. The budget of a customer was taken into consideration, instead of his need: ‘This customer has a hundred guilders, what kind of insurance coverage can he buy for that money?’ That is not in the interest of the customer."
Another issue is the conditional sale. Denkers: That is a real problem: the phenomenon whereby you can only get a car loan from a company, if you also sign up for car insurance at the same company. Soon that will not be allowed anymore.
Furthermore the information about the financial products and services will shortly be critically examined. It should be correct and clear, and – important says Denkers, "not misleading". It concerns tv ads, brochures and advertisements.
"Lenders should lend money in a responsible way, and people should be able to borrow money in an equally responsible manner. In recent years a lot of work has been done here on in the Netherlands and that will also happen here. The Dutch Caribbean has a borrowing culture. We want to ensure that this borrowing happens in a responsible manner. And that banks and insurance companies treat their customers properly."
Where necessary the AFM will take action when a party fails to comply with the laws and regulations. Whoever thinks that he is not properly treated or informed by a financial institution, can notify the AFM. The AFM can investigate it further. If necessary, the AFM can have a conversation with the company. But the AFM can also take formal measures such as giving a public warning, revoking a license or imposing a fine.
The AFM will conduct supervision from its office in Amsterdam. However, employees of the supervisor will travel to the islands several times a year to conduct investigation on the spot. How exactly that will look like, is not clear yet. Denkers: "We work on the principle of ‘risk-based supervision’. That means that we focus our capacity on those areas where there are problems. That is what determines the allocation of our people and resources."
AFM is independent
The AFM is an independent organization. The Minister of Finance is responsible for the policy and legislation in the field of financial markets. Consequently, the AFM conducts supervision thereon. The AFM also advises the Ministry of Finance on new legislation.
The AFM works with De Nederlandsche Bank (DNB), another important supervisor. The AFM and DNB monitor different issues. The AFM monitors the behavior of financial firms. DNB inspects if financial companies meet their financial obligations.
People may approach the Meldpunt Financiële Markten Consumenten with questions or complaints about savings, loans, insurance and investment.
The AFM can take measures in the field of supervision but it does not mediate in cases of complaints about financial institutions.
AFM website for consumers: www.afm.nl/ consumenten
PHOTO:
Employees of the Financial Markets Authority (AFM) were on Bonaire to provide information about the AFM and the Law on financial markets BES (WfmBES), which should take effect July 1st.
In the photo Michael Thinkers, head of the Supervision Department of AFM, giving a lexture about AFM in Divi Resort before representatives of the banks and insurance companies.
Photo RCN