[No. 21] In Search of the Smoking Gun

This post comes from

Annemetje Koburg

Dutch Minister of Finance Wouter Bos has doubts – as does Nout Wellink – about the information provided by the Belgian CBFA) and British (FSA) financial supervisors as to the ABN Amro takeover, especially the position of Fortis and Royal Bank of Scotland. Apparently the FSA did not inform Wellink about RBS’ liquidity problems and 36,6 billion euro’s of financial support provided by the British government. Wellink also wondered whether the CBFA gave sufficient and timely information about the problems at Fortis.

It seems that appropriate scape goats can also be found abroad. Which makes me wonder whether the CBFA and FSA could face potential liability.

Although the CBFA is granted legal immunity, it nevertheless can be held accountable for fraud or gross negligence (bedrog of grove nalatigheid). Also the FSA is granted immunity concerning supervisory actions or negligence, with two exceptions: (i) acts in bad faith and (ii) violation of ECHR provisions. Thus, no full immunity, which is in line with the Core Principles for Effective Banking Supervision issued by the Basel Committee on Banking Supervision, that recommends protecting supervisors from personal and institutional liability for supervisory actions taken in good faith. The Dutch situation is a bit different, in that we don’t know this whole immunity concept as to financial supervisor liability. Under Dutch law, supervisor liability is basically rooted in tort.

Het Nederlands beleid is dat toezichthouders aansprakelijk kunnen worden gesteld indien zij door een toerekenbare onrechtmatige daad schade veroorzaken. In tegenstelling tot de situatie in enkele andere Europese landen (Verenigd Koninkrijk, Duitsland, België) is er voor financiële toezichthouders geen immuniteit geregeld. DNB loopt zowel de kans om aansprakelijk te worden gesteld door degenen op wie zij toezicht houdt als door derden indien deze schade lijden door inadequaat handhavingstoezicht. De kosten zijn daarbij uiteindelijk voor de Nederlandse Staat. Uit jurisprudentie en onderzoek blijkt dat een redelijk handelend toezichthouder geen groot aansprakelijkheidsrisico loopt.

So, in Belgium and the UK it’s possible in theory to hold financial supervisors liable. But in practice? We’re basically talking about bad faith behavior here, as the exception to the rule of immunity. Aside from the proverbial ‘smoking gun’, that will be an uphill case to make in court, to say the least.