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ACLE 2009 Financial Markets Oversight

This evaluation discusses competition enforcement in the Dutch financial markets, particularly following the 2008 financial crisis. It analyzes historical competition measures relating to banks, insurers, and capital markets while addressing state intervention and the role of competition enforcement. Key areas include market definitions, characteristics of fragmented markets, entry barriers, and the effects of mergers like Fortis/ABN and Lloyds/HBOS. The evaluation further examines insurance sector dynamics, capital market consolidation, and calls for strengthened international cooperation in future EU financial regulation.

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ACLE 2009 Financial Markets Oversight

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  1. ACLE 2009 Financial Markets Oversight An evaluation of competition enforcement in the Dutch financial markets Geert van der Klis, Pier Posthuma de Boer & Frans Muller March 6, 2009

  2. Introduction • Financial/economic crisis • State intervention • Competition enforcement’s role • Our contribution • Evaluation of historic competition enforcement in relation to banks, insurers and capital markets • General rules of thumb for competition enforcement on Dutch financial markets • Competition enforcement in Dutch financial markets after the financial crisis 6 March 2009

  3. Banking sector • Market definition • Retail • Corporate/Wholesale • General market characteristics • Fragmented markets • High level of cooperation • Various levels of transparency • Entry barriers 6 March 2009

  4. Fortis/ABN and LLOYDS/HBOS • Fortis/ABN • Most important concentration of banks in the Netherlands – in depth investigation • Competition issues in Corporate Banking market • Remedies – HBU • Lloyds/HBOS • Competition Issues • No referral to Competition Commission (UK) • Public interest – stability UK financial sector 6 March 2009

  5. State Aid • EC involvement • EC Guidance on • Guarantees • Re-capitalisation • Bad banks / Toxic asset relief • Dutch Aid Measures • Guarantee scheme (LeasePlan, NIBC) • ING (re-capitalisation, asset relief) 6 March 2009

  6. Insurance sector • Market Definition • General distinction between • life insurance • non-life insurance • re-insurance • General market characteristics • Geographic scope generally limited to the Netherlands • High level of cooperation between competitors • Significant consolidation • Factors of competition • Price & quality • Size and quality of distribution networks • Conglomerate effects • Other 6 March 2009

  7. Insurance sector • Merger Control • Relevant markets (very fragmented) • Health insurance, indemnity insurance, life insurance, pension schemes, asset management • General competitive analysis • Unilateral effects, coordinated effects, conglomerate effects • Behavioural issues • European Commission Regulation 358/2003 – the “Group Exemption” • Commission sector inquiry Business Insurance • Solidarity Protocol (2002) – Dutch Healthcare Insurers • Model Compliance Regulation (2004/2007) 6 March 2009

  8. Capital Markets • Focus on undertakings active in the market for ‘infra-structural’ services • Stock Exchanges • Listing services and (share) trading services • Clearing Houses • Clearing and central counterparty services • General market characteristics • High level of internationalisation • Limited size of undertakings (lack of merger control) • Significant consolidation (through both horizontal and vertical integration) • Factors of competition • Location of undertaking’s activities • Technical innovation (efficiency) • Costs • Additional (post-trading) services 6 March 2009

  9. Capital Markets • Concentration Control (mainly in the UK due to market share merger control thresholds) • Stock Exchanges • NYSE/Euronext • General market consolidation • Lack of significant switching • High barriers of entry • (Euronext/Deutsche Borse)/LSE • Vertical effects • Clearing Houses • LCH/Clearnet • Lack of significant switching • Relatively high barriers of entry • Vertical effects 6 March 2009

  10. Competition Enforcement after the Financial Crisis • Fragmented enforcement policy • The Government sometimes creates a market and sets conditions thereon • International developments • Intensified cooperation between international authorities • Future EU financial regulation • Position ABN in the Netherlands as state owned bank • Relevance of Competition Law intervention if market failure is not competition related 6 March 2009

  11. Geert van der Klis, Pier Posthuma de Boer & Frans Muller Clifford Chance LLP 6 March 2009

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