NMa Concludes: Entry to Dutch Banking Sector Is Restricted

Banks experience little or no competition due to the entry of new parties. Each year an average of approximately four banks enter this market, compared to an average of six banks that cease their activities in the banking sector. The number of 'exits' is therefore higher than the number of entrants. In addition, the total number of entrants and exits has decreased since 2003. These are the conclusions reached by the Netherlands Competition Authority (NMa) in the Financial Sector Monitor 2005.

Pieter Kalbfleisch, Chairman of the Board of Directors of NMa, on this result of the Monitor: "The Dutch banking sector is dominated by a small number of large banks and has barriers to entry as a result of switching costs, vertical integration, and legislation and regulations. The limited number of entrants may result in a decrease in market dynamism and competition. The FSM 2006 will therefore include research into the causes and consequences of the limited number of entrants."

For the first time, the Monitor pays attention this year to developments on the market for health insurance. This market is being liberalised and is therefore undergoing considerable change. The FSA outlines a number of future scenarios with regard to the way in which NMa could define the health insurance market in assessing mergers and other concentrations. For the time being, NMa cannot exclude the possibility of regional markets for products and services offered by health insurers on the health insurance market. In 2006, the FSM will carry out a more detailed analysis of competition on the health insurance market in cooperation with the Healthcare Charges Board [College Tarieven Gezondheidszorg (CTG)] and the Office of Health Regulation [Zorgautoriteit (Zaio)] which is currently being established.

The FSM concludes that the intensified regulation of the financial sector by NMa has borne fruit. Research by the FSM into the development of PIN tariffs for PIN transactions shows that competition has increased. The reduction in PIN tariffs paid by retailers of at least one eurocent, which the banks and retailers agreed to in November, may strengthen further this emergent competition. FSM will continue to monitor the development of PIN tariffs in 2006.

The FSM was set up at the beginning of 2003 with the support of the Ministry of Finance. It carries out economic research into the operation of the financial markets and analyses the risks to competition. In the Monitor, NMa does not issue formal decisions within the framework of enforcement of the Competition Act. The aim is to share knowledge and insights with all interested parties within and outside the financial sector. NMa invites interested parties to respond to the contents of this FSM publication.