Dutch Nat'l Bank warns of bubble

The supervisor of De Nederlandsche Bank says that the positive mood in the financial markets may just turn.

For example the interest could suddenly go up, with all its consequences. The financial position of the banks will be affected, the supervisor warns in his semi-annual report on financial stability.

The relative calm in the financial markets may point out that a new bubble is forming. This is evident from previous periods of calm. According to De Nederlandsche Bank (DNB) president Klaas Knot, at this moment too much is invested in risky corporate loans and government loans of southern countries whose budget is not in order.

The bubble could burst at any moment. "We never know when it will happen." says Knot "What we do know is that it often occurs after a period when it seems very quiet, and that is a period we are in now."

Knot is relatively optimistic about the economy in the Netherlands. "Now that house prices are rising again and people have more to spend, we are no longer solely dependent on the export." That is good because exports are under pressure due to the global tension and the boycott of Russia. But economic growth is still vulnerable, according to him.

Knot sees that the Dutch banks are already achieving higher profits, but the ties before the crisis will not come back. Knot says that that is also not desirable, because to get such returns, banks will need to take excessive risks.

 

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