Dutch pension funds have to pay special attention to financial risks. In response to the troubles in the UK, regulator De Nederlandsche Bank (DNB) is asking funds to thoroughly examine the financial situation.

The business newspaper Financial Times writes about the call, which follows after British pension funds rushed to get rid of their British government bonds. They plummeted in value following Prime Minister Truss’ controversial plans to increase the budget deficit.

According to the newspaper, Dutch pension funds need to hold more cash and other assets that can be quickly turned into cash.

Nederlandsche Bank says there are no problems with pension funds but advises them to prepare for serious developments in financial markets. “The situation in the UK has shown once again how important this is,” said a DNB spokesman.

hedge risks

Pension funds protect against the risk of rapidly rising interest rates and hold collateral for it. When interest rates rose rapidly due to the loss of confidence in Britain’s public finances, funds had to come in with extra money. British funds sold British debt securities. This quickly lost value and forced the pension funds to quickly raise even more funds.

That could also happen in the Netherlands, although the risk is lower here, DNB President Klaas Knot told FD last week.

“UK pension funds are big in UK government bonds. Dutch pension funds have diversified their investments because they do not take exchange rate risk within the euro zone. Also, the buffering requirements in the Netherlands are higher than in the UK. So it takes a lot longer to get to the point where you have to sell to meet collateral requirements.”