Minister of Finance Dijsselbloem ends reign of incrowd-supervisory-model for Authority Financial Markets

The last couple of weeks, the Dutch Financieele Dagblad reported on the fact that our Minister of Finance, Jeroen Dijsselbloem, had actively intervened in the workings, nominations and appointments of the Members of the Supervisory Board for the Authority Financial Markets. The dynamics of the case have a historic relevance that I would like to highlight in this post.

Incrowds at the Amsterdam exchange
The Amsterdam exchange, which has a long history going back to the early 17th century, has since its start been an open exchange. All who wished could enter the exchange and do business. But specialisation happened over time. Brokers existed, that were licensed intermediaries that could help out the incidental exchange visitor to find the proper counterparty.

As centuries went by, the specialist incrowd of traders on the exchange favoured an exchange were not just anyone could come and do business, but only licensed or vetted members. The city council of Amsterdam opposed this principle, but had to give in once the Berlage exchange building was in place. The building allowed for a physical separation and access control which provided the traders their own space, with their own rules. Papers report that even police men were pushed out of this space as the traders considered it their own land/country/turf/territory with its own rules.

The cherry on the cake, for traders, was -in 1914- the move to the Amsterdam Exchange building at Beursplein 5. They had their own rules, their own building and -of course- their own governance rules. A self appointed group of professionals was assigned to supervise trading and the trading rules. Eventually this was organised in the so-called Foundation Supervison Securities Trading (Stichting Toezicht Effectenverkeer). Of course, only in-crowders were appointed to be board members.

From self-assessment to a formal supervisor
As of March the 1st, 2002, the actual supervision of the stock exchange is in the hands of the Authority Financial Markets. This is an independent government body that has since grown into the so-called conducht-supervisor. It supervises conduct of players in the financial markets, and has expanded its reach to also supervise accountants, intermediairies, investment funds and so on.

The composition of its board of supervisors has varied over the years since 2002, but there was one remarkable choice in 2010. Minister Bos chose to appoint George Muller, formerly executive with the Amsterdam Exchange (which became Euronext) as the chair of the board. This was remarkable as the stature of Möller, in my view, was disputed. Möller had previously agreed on becoming the boss of Euronext at some stage and when he didn't land that job, he quit at Euronext to work for Robeco instead.

Although anyone is free of course to make such a career move, it does tell the observer that this person attaches quite some value to prestige and may be someone with a bigger need of attention. Also, one could argue that it is good to have a former insider in the Board of Supervisors of the Authority Financial Markets. On the other hand, it is once again a choice for the senior white male, rather than a competent female professional. It also doesn't take on board the fact that the role of the AFM grew bigger than a mere markets-supervisor.

An end to the era of old-school-male incrowders
Internal discussions within the Supervisory Board of the AFM gradually hit the news and revealed that the male Board Members were more flexible as to rules with respect to side-jobs and obligations than the female Board members. One of the female directors that missed out on a re-appointment had a regular exit-interview at the Ministry of Finance. This lead to further investigations into the workings of the board, side-jobs and so on.

The Minister of Finance decided to reshuffle the board of supervisors, some of them left and the Ministry motivated the board to appoint Merel van Vroonhoven as the new director of the Authority itself. This is quite an intervention indeed. When seen from a historical perspective however it is a measure that was long overdue. It is an appropriate end of the era of old-white-male stock exchange traders-incrowd that make up and play by their own rules, regardless of the interests of society.


Reflection on almost 100 years of retail payments in the Netherlands

Today marks the end of a period of almost hundred years of consumer payments in the Netherlands. Here is a brief reflection on this period. My hope is that we retain our innovative mindset and that we abandon old school practices like: competition on technology and inward-thinking-based marketing practices.

The beginnings
It all started out with a certain demand of the public and small retailers, around 1900. It took however more than ten years before the city giro of Amsterdam (1916) and the national giro of the Netherlands (1918) were set up. In the period leading up to this moment, the cashiers were asked whether they wished to improve their services, as this might lead to the parliament to conclude that no national giro was necessary. Their response was too meagre as a result of which they created their biggest rival: the national giro system, operated by government.

This system effectively created a benchmark for the private industry by offering (some time after it's start) payment services for free to the public. Today we would call this the Internet model, but in those days, this lead to repeated discussions on the undue competition element. Bankers and cashiers assumed that the national giro was cross-subsidized by government; while effectively the reverse became true. The national giro acted as a cash cow that covered some of the other costs for the Ministry of Transport (including the costs of post offices etc).

The city giro Amsterdam has stood out mostly for its innovations: the use of modern bookkeeping machines, the introduction of photo-imaging (in the 1930s) to process payments easier as well as the early introduction of a payment card to the public. The national giro, in turn, was early to create a mechanism of inpayments that could be used by government services, that used similar (punch card) standards.

In this respect it should be noted that the national giro, during the previous century, was plagued by several operational distortions, leading to 'giro stops'. One big one occurred in the 1920s and shut the system down for almost a year, other ones happened after the second world war. These stops instilled a big trauma into the organisation with the effect that when in 1965 a change was made to using punch cards and mainframes, this was done with meticulous scientific precision in order not to fail. Ever since, the postal giro (later Postbank) would be very keen and strong in the area of operational logistics and control.

Competition on standards and technology
For the most part of the evolution of Dutch payments, there were differences in technology used. A first attempt to bridge these differences occurred after the second world war when a commission on the integration of giro traffic tried to bridge the bankers vs giro gap. This didn't work out.

In the mid 1960s the bankers were keen to find funding in the retail market and realised they needed a better clearing system to process faster payments. While they were in the process of deliberating this move, the postal giro offered them to join/use the same standards as they were, in order to achieve uniform processing. For strategic reasons, the banks decided not to do this and chose a slightly modified technology and numbering system of their own. Remember: this was of course the age of shielding off markets by technology.

The net effect for the consumers and companies was less positive however. In the end it took some 30 years to create bridging standards/protocols to integrate the different payment standards of bank and giro. And even when the digital, networking time started (in the 1980s) banks and giro found it hard to abandon the classic competition by technology paradigm. For the EFTPOS network they did use a common standard and this also seemed to work for the Chipknip e-money products. Yet, due to misunderstandings and distrust at the board room level, the Postbank decided to jump the Chipknip ship to start the separate Chipper product. Again, the effect was that consumers and retailers were burdened with dual standards in a market that is too small to do so.

Inward based marketing of the big banks
With the deregulation of financial markets and the privatisation of the Postbank, all providers of payments were commercial companies. The Dutch banks grew bigger and with that their bureaucracies. Postbank gradually lost its touch-and-feel as a former public entity and became a bank like all others. The best event that symbolises this is the abolition of the Postbank brand by ING.

The net effect of becoming bigger and more ambitious is that straightforward customer research and marketing gets stampified. This is a word that I coined to denote the fact that in those big banking bureaucracies the responsibilities of employees - with the only exception of the board - becomes limited to the size of a postal stamp. The result is that these companies (marketing) departments require more time for internal debate, offcie politics and consensus-finding which they can't spend at finding out how to best serve the customer.

The consequence of this stampification is that the banks lose touch with their customers and reality. Our last retail payment product, the Chipknip, showed this most clearly. The ridiculous local battle between two competing e-money schemes (although perfect from a competition perspective) created so much nuisance for retailers that this inspired them to get back at the banks. Infuriated by high terminal switching costs, they found the newly set up competition authority at their side to fight the banks cartel behaviour.

As such our retailers were quite successful: the banks were being fined and a part of the fine was channeled towards them (via a Covenant) to improve the EFTPOS situation in the Netherlands. This Covenant was even prolonged to ensure a continued collective rebate for retailers on EFTPOS fees. Effectively we could thus see the retailers as being the clear winners in the last 15 years of retail payments here in the Netherlands. [And as with today's MIF-debate we can wonder whether the benefits they derived from emptying the pockets of banks did really end up in the consumer pockets by lower prices.]

Back to inward-based-marketing: the best (and typical) example is the way the Chipknip product was initially taken off the market. Banks informed the customers that they all had to unload their Chipknips at specific loading/unloading points. This lead to a big confusion and questions on twitter. Eventually some individual banks decided to give the money back on the basis of the internal administration so that customers didn't need to bother going to an obscure loading point. And then, quickly, all banks decided to do this.

I sincerely hope that we will no longer witness these old school thinking marketing methods in the new year. Banks need to find a way to innovate and listen to clients and society or they will be trapped in old behaviour that is only comprehensible from a stampification point of view but not understandable for customers outside the bank.

If history is anything to go by, we may well see a repetition of the SEPA-dynamics in the banking domain. What I mean with that is the following: as banks are busy lining up their internal systems in order to conform with a whole range of upcoming new EU regulation (keywords: PSD2, MIF, AML), the non-banks will be able to build all kinds of new products at the fringes of the payments market.

Most of these new products won't be made from a payments perspective but will solve a user problem. Creating a payment button in these products doesn't require much more than a direct customer relation and a European direct debit agreement. So we might well see the banks moving into a back-seat role of providers of the payment rails for non-bank providers of user services.


Late july in 1914 and 2014: two significant moments in time

A hundred years ago, the first World War was gradually developing. The political and military turmoil affected the stock exchanges all over the world and the Dutch stock exchange closed. In the Netherlands a run occured for physical silver and the government decided to issue the so-called 'Zilverbon', which was a future claim to physical silver as it would become available. Almost overnight, the payments infrastructure was changed; an infrastructure that was mostly based on the use of cash rather than bank accounts and payment instruments.

Fast forward to today: after a long period of careful planning, we are again at the verge of changing our payment infrastructure by moving to European standards in the retail payments domain. Both political and economic drivers have caused a massive technical change, which to the consumer is mostly visible via the ultralong new bank account number IBAN that has to be used as of tomorrow.

What changed in the mean time?
In between these two historic moments we witnessed:
- the gradual development of city giros, nationwide giro and bankgiro systems, account systems and the development and issuance of domestic payment instruments (acceptgiro, standing order, direct debit, guarantueed cheque, card and app payments),
- a continued learning process with respect to counterparty risk (on the exchange or with respect to banks and countries) and the development of a lot of regulation to mitigate this,
- two world wars, followed by the further economic integration of European countries into the European Union; a body that shows Member States that are still struggling with their position with respect to military action in the Eastern parts of Europe, bordering Russia,
- an improvement in living conditions, welfare and wealth.

What really changed?
It is not easy to distinguish the underlying changes in our society. Technological change may often appear to be progress while it simply reflects and allows the human faults to be reproduced on a more advanced level.

Still, I would hope the most significant change over the last century to be that we have created a number of institutions (UN, GATT, BIS, World Bank, IMF) that allow countries to not fight their battles on the ground but in economic terms. There are of course deficiencies within these institutions, but I would hope that we will move forward in using these structures to limit the amount of military conflicts as much as possible.


The Dutch experience with standing committees in the retail payments domain

On Friday, the 16th of May, the Euro Retail Payments Board (ERPB) held its first meeting in Frankfurt. The start of this new institutional body may raise questions in the industry as to its exact objectives and what it will achieve in practice. However, Dutch history shows that there are clear benefits to having long-term standing committees in the retail payments sector.

Standing committees in payments: the Dutch case
Originally, the Dutch market for retail payments consisted of privately owned commercial banks, savings banks and cooperative banks that competed with the government-operated Postal Cheque and Giro Services. The system design of these providers differed. The private players had set up the so-called Bankgiro system as opposed to the Postal Giro system of the State.

In the 1980s, the technology difference served as a barrier between the institutions, which remained in place until the State privatized its Giro-services in 1986. Subsequently the work started on the harmonization of technical standards by means of the work on the Dutch Payments Circuit (Nationaal Betalings Circuit). It took until 1998 for all the different types of payment mechanisms to be fully harmonized.

Although it did take quite some time to harmonize the technical standards in the Netherlands, the regular interaction between industry players improved the trust and willingness to cooperate on issues of common concerns. So when the need arose, in the 1990s, to drive down the costs of retail payments a dedicated task force was set up. The task force developed an array of measures and communication to steer the users to the most efficient payment mechanisms. The effects in changing the payment mix in the Netherlands were clearly visible.

National Forum on the Payment System
At the end of its term, in 1995, the task force was converted into a standing committee on the efficiency of payments in which both the demand and supply side were represented.[1] This standing committee was the precursor to the National Forum on the Payment System that was set up in 2002. This National Forum functions as the platform in which issues with respect to retail payments are discussed between representatives of suppliers and users of retail payments.

Over time, the Forum has established working groups on the migration to EMV, on the migration to SEPA, on usability, security and efficiency. It has become the platform for discussion of market developments and collective decision making to improve payments in the Netherlands. For example, when the 1 and 2 eurocent coins in practice created too much confusion for consumers and unnecessary costs for merchants, the members in the forum agreed to abolish the use of these cents and to implement a rounding procedure. This improved the efficiency of Dutch retail payments by approximately € 30 million per year.

Unlocked potential in forming bonds and creating trust
In the Dutch situation there have been many participants to these standing committees and working groups that at the time felt that a lot of their work amounted to pushing back and forth paperwork rather than contribute to real life problems. And to be honest: at some stages of the process or in some working groups this may have been the case. 

I have spoken to quite a number of participants to such committees and working groups. In hindsight most of them acknowledge the value of the trust and bonds that are being built by working together with opponents and competitors on issues of interest. These bonds and relations spilled over into an increased trust and cooperation outside the formal scope of the committees an working groups. Both board members and technical experts create a wider and trusted network of counterparts that were consulted when the need arose. 

We should therefore recognize that apart from the actual output, the ERPB work in itself will also create trust an bonds in the European retail payments industry. This will unlock further potential and further cooperation that will be beneficial to all in the retail payments sector. It is this 'hidden value' that must not be underestimated.

[1] The so-called Working Group on Efficiency in Payments: ‘Werkgroep Efficiency Betalingsverkeer, which was chaired by Mr. Klomp, a highly respected representative of Dutch retailers.


Frijda's theory of money (1914): still relevant for bitcoiners today

This week, Mount Gox, a very large provider of bitcoin services, couldn't live up any more to its services agreements with bitcoin users. It provided exchange and storage services for bitcoins, but due to a technical implementation flaw, the bitcoin holdings of users were compromised. Essentially it wasn't clear who really owned the bitcoins. The website went black and users can no longer claim their bitcoins.

Tumbling off the learning curve
I view the failure of Mt Gox as a logical consequence of the learning curve that bitcoin holders and bitcoin companies face. The bitcoin, although considered decentralized, is just as centralised a system as any other value transfer mechanism. However, for ideological reasons, the developers chose to only describe the technical heart of the system (the algorithm) leaving the rest up to the market.

This open source code approach has some advantages, among which a very speedy development of applications. Yet, we are for some time now witnessing what it means if systems lacks a central authority or scheme manager. There is no entity taking responsibility for the proper application of this scheme so no one is chasing users or companies because they don't abide by:
- usage conditions (demanding user identification),
- security requirements and certification of tools,
- specific legal frameworks.

As a result we have seen a whole community of interested companies and users climbing up the payments, banking, investments and monetary learning curve. The inevitable consequence is that those who do not get it right, will pay a price, while the others continue to learn. Due to the digital nature of bitcoin, these developments unfold rapidly, allowing us a compressed overview of interactions and developments from financial history.

Frijda's theory of money (1914)
The essential lesson at stake is that the usage of any value transfer mechanism does not just rest on its acceptance by users, but just as well on the rules and regulations that underly the value transfer. In 1914, the Dutch lawyer Frijda analysed this topic in his dissertation on the theory of money. At that time discussions emerged on the nature of banknotes. Did they have value because they were exchangeable for bullion, because they were defined as legal tender or because the public used and accepted it?

Frijda pointed out that the underlying legal framework that safeguards property in a society constitute a necessary precondition for the use of payment instruments. Without such safeguards, people will tend to stick to other stores of value rather than attaching value to local bank notes. Until today this effect is clearly visible: consumers tend to hold and use foreign cash or commodities if they live in country with a lot of curruption, a weak system of justice and an instable monetary climate.

Trust is built by institutions and markets
What makes money tick is a solid institutional basis, upon which trust can be further developed. The latter part can be done by a combination of regulation (supervision) and self-regulation (market action). Which brings us back to the Mt Gox cas.

Following the events of this money, a statement was released by the bitcoin companies Coinbase, Kraken, BitStamp, Circle, and BTC China. The industry leaders committ to safeguarding the assets of customers, to applying strong security measures, to using independent auditors to ensure integrity of their systems and to have adequate balance sheets and reserves to be able to ensure continuity.

In sum we can now see both a gradual development of both the institutional framework for virtual currencies and the market-driven self-regulation. This reflect the fact that - whether you like it or not - trust for financial services is always built on institutions, regulations and self-regulation.


All 2013 activities for Financial History of Amsterdam

Launch of digital museum 'Financieel Erfgoed op de Kaart'
Financieel Erfgoed op de Kaart2013 started out with the launch of our digital museum on Financial History. It is called Financieel Erfgoed op de Kaart and is a website that contains the stories and lokation where financial history happened. The site can be viewed on the desktop, in which case it looks like a rich google-map, or via the mobile. The mobile is sensitive to the location and will show the nearest hot spots of history as well as a responsive mobile menu. The launch was covered in both national and regional media and has a steady flow of visitors ever since.
Boat- and walking tours
We organised several taylor-made walking tours on the financial history of Amsterdam for visiting US Students, Norwegian insurers, financial supervisors, Nyenrode college students, employees of Booking.com and the Dutch Ministry of Economic Affairs. On top of that we introduced a boattour on the financial history of Amsterdam, for two large organisation in the financial sector. 
April: Filosofy night on guilt and debt
In april of 2013, the Filosofy night was dedictaed to the theme of guilt and debt. We presented an overview of history and future of money with the title: “Back to the future”. In addition we joined a radio show conversation with Werner Trio of Radio Klara on the topic of money and value.
The Filosofy Night occured in the former Exchange building: 'de Beurs van Berlage'. This inspired us to dedicate a separate part of our virtual museum on the financial history to this site. Since then, all visitors of the Exchange building can use their mobile phone to have a look at the financial history of that building
We wrote some guest blogs. One was about Leviathan for Felix Meritis, the other was a blog on the hands, swearing an oath, at the Amsterdam Museum site. Apart from that we regularly published in the online-blog of the Dutch Financial Newspaper: het Financieele Dagblad. We presented an unknown story of Amsterdam's city giro for a festive event in June and held a workshop on the future (and past) of money for a large financial institution.
Radioshow: Casa Luna
To end the year, we were asked to join the Dutch radio show Casa Luna to talk about the history of money, alternative payments and the current situation in the banking sector. This was a very inspiring two hours of discussion, with a nice deviation to the role of artists and their capability to point out the faults in the financial system, way before supervisors acted. 

2014: pubquiz and walking tour apps
In 2014 we will continue sharing our passion for financial history with all visitors to Amsterdam. We will develop a pub quiz on financial history and launch an iTours app on the financial history of Amsterdam. It will show pictures from the city archive and allow you to experience the history in your own pace. 

We look forward to seeing you in the new year !


Tapering delayed: another historic moment for the FED?

Yesterday evening, Money 2.0 was on the agenda in the Arminius church in Rotterdam. It was an evening in which I briefly outlined some of the major developments and lessons from monetary history to the audience. This coincided with an announcement of the Federal Reserve Board on their monetary policy, that may prove to become a historic case in point.

Balancing the amount of money against economic activity
I explained that history learns us that the amount of money in a society needs to balance the economic activity. The role of central banks is to monitor both and make serious judgment calls as to whether or not contract or expand the so-called monetary base. Expanding too much may lead to high inflation, and a more restrictive approach can lead to deflation. Finding the right balance is thus the essence of monetary policy.

I sketched that each country has in the past experienced a different learning curve in executing monetary policy. These differences help to explain why the German central bank (and the ECB, in its first years of existence) tend to be restrictive and careful not too expand the money base, while the FED appears to lean towards easing the money supply. As if to prove my point, at that very moment, the FED informed the markets that they were delaying their planned contraction of the monetary base until the economy would be seriously better.

Now, let's see where this might be coming from.

Different lessons lead to different central bank styles
First, we will look at the situation in Germany between the two World Wars. Germany had to pay France a huge amount of money as 'repair' payments for the damage done in the war. A sequence of events in 1922 however makes it clear that the Germans will have a hard time paying back their money. And as a part of the conflict between France and Germany, the Germans start printing money, to finance a strike in the industrial area of the Ruhr. The cumulative effect of the developments - see Kindleberger-  was hyperinflation and even the Dutch still recall this (some of us are still holding worthless million mark notes of those days).

Now, let's have a look at the United States at the end of the 19th century. We can see a depression, deflation and a shortage of money. And there is a serious debate as to the use of gold or silver as a standard to base the currency on. This discussion even filters down to a book, the Wizard of Oz, as Hugh Rockoff explains here. In short, the US experience is that you have to be careful not to have a shortage of money.

As both memories linger on in the collective minds, we can thus see that the German central banking approach is not to ever encounter high inflation again. They tend to be on the careful side and tried their utmost to instill this sense of discpline in the European Central Bank. Meanwhile, the FED is making sure not to ever encounter a shortage of money again, so are expanding their money base more easily.

Delayed tapering: a historic moment ?  
When the FED yesterday announced that they were not yet going to contract the money base, this came as a surprise to the market. Earlier this year, Bernanke had explained that the FED would slowly start contracting the money supply. So he caught the market off guard. And in a few years, we can determine if that was indeed a historic moment. I think it was.

The FED-announcement above all marked the beginning of an unclear policy. So far the FED has been careful to explain and predict its own moves to the market by providing so-called forward guidance. While a bit unconventional, the market has been getting used to this guidance and has also responded to the earlier announcement of more restrictive monetary policy. This response may in turn have led the FED to change its previous opinion on the timing of tapering.

What may happen now is that the market and the FED get entangled in a dance where neither party knows whether to lead or to follow. Both are looking at each other while trying to find out if the economy itself is getting in a better or worse shape, as a result of their dancing. Rather than leading the dance, based on the music, the FED is now adapting to the dance partner as well.

It's this ambiguity of the FED and increased unpredicatbility that may well make yesterdays announcement a historic one.


Morality meets money on Filosophy Night (12th of April) in Amsterdam

Morality and Money. Two concepts that are - whether you like it or not - infinitely intertwined. As we witness European funds and cash being sent to Cyprus, we can also observe that a number of conditions are attached which seek to address concerns as to the 'tax haven shelter' or money laundering nature of its financial sector. In a similar way it is impossible in todays Dutch society to cheerfully announce anything on the topic of bonuses, without ending up in a moralistic debate. But the link between morality and money is far deeper than that.

On the evening of the 12th of April, the Beurs van Berlage in Amsterdam becomes the venue of the so called Philosophy Night. It's an evening organised by the Dutch Philosophy Magazine and has a dense programme of lectures, discussions, interviews that all revolve around the relation between money, philosophy, morality and guilt. Visitors will be able to choose among many sessions to discover the views of philosophers, journalists, bankers, politicians and artists. While most of the programme is in Dutch, the English-spoken part of the programma itself contains a very nice line up with Michael Sandel, Thomas Sedláček, Jules Evans and Donna Dickenson.

Sandel is of course well known for his college sessions on Justice and the moral limits of markets (on which he wrote in: What Money can't buy) and he will be the main guest that opens the evening. Later on, that night, Tomas Sedláček will give a presentation on the main theme in his book: the Economics of Good and Evil. He argues that economic discussions are so intertwined with culture, art, philosophy etc that discussions on economics boil down to questions of good and evil.

Jules Evans, author of the book Filosophy for Life, will be discussing how the Stoic way of thinking may be helpful in liberating ourselves from the chains of commerce and the addiction to money, power and status. And finally Donna Dickenson will be interviewed on the subject of selling body parts for money. What are the practices, how far can this go, should there be a limit?

The fact that these subjects are discussed in the Berlage Exchange Building is quite symbolic by the way. It's designer, Berlage, has chosen to translate his and Albert Verweijs view on the future development of society into the artwork of the building. And that view was that there would be an inevitable further development from an industrial society to a new society in which money and trade no longer exists and man/women live equally and happy ever after. So even the building is engaged in the debate of that night.

To see this, just look up when entering the building, on the 12th of April and you'll see a carving in relief of people grouped together. Below are the verses by the poet Albert Verweij which (translated) say:
`The earth will soon be one: its peoples are groups all,
forming one great union the wide world round.
Ships on the sea advance, trains over land
to varying ends as they go they call'.

See for more info the English Page of Philosophy Magazine here.


History of nationalisation of SNS unfolds quickly .... it's not the endgame that matters

Yesterday evening, the Dutch RTL-news released a number of confidential documents about the supervisory and regulatory discussions on SNS Reaal Group. And while it could be expected that bits and pieces of this process would slowly enter the public domain, I must say this is a very rapid disclosure. It also allows a further reflection on the very recent financial history: the nationalisation of SNS Reaal Group.

The endgame
The details of the latest discussions, just before the nationalisation, are highly fascinating. We see the board of SNS fighting for their bank, clinging onto the hope that:
- the regulator sees that the valuation of the possible losses in property finance should be lowered,
- hence, nationalisation cannot be considered a valid legal option (as any loss would not be sufficient enough to trigger the legal nationalisation bazooka),
- thus: the CVC offer stands a good chance of continuing.

Meanwhile the regulators' view is also quite clear. DNB, the central bank and supervisor, has been very patient and lenient in allowing the search for possible private-public solutions. But at some point they have to draw the line. This point arrives when the SNS-CEO and CFO explain in January to the Minister that it is either the CVC bid or nationalisation. Perhaps they hoped that this would force a momentum for the CVC-rescue.

Instead, this statement may have finally convinced the Ministry of Finance and DNB that a nationalisation was indeed the only option. The proposed deal of CVC did indeed, as our Minister of Finance explained during a press conference, contain too many goodies for CVC with too little compensation for the State. Furthermore, as I was expecting, CVC was asking for something impossible: the committment of the supervisor not to intervene in the coming years. In sum, the private-public rescue action was nowhere near to a solution that suited both the business and the regulatory constraints.

2011- and later... working towards a solution
The RTL-papers also clarify the run-up to the nationalisation. It's interesting to note that at the end of 2010, the supervisor observes that SNS Reaal Group is undercapitalized and unable to really wheather a further storm in the market or the media. From that moment on, all work is geared towards eliminating the risks in the portfolio and getting SNS Reaal to take all necessary action, including the sale of parts of the company.

I think 2011 also marks the start of a period in which both DNB as a supervisor and the Ministry of Finance become aware of the fact that some form of rescue may be necessary. But it's a different rescue this time. There are obstacles that stand in the way of the usual solution: inviting the biggest Dutch players and working out a way to safeguard continuity. This did still work for the smaller Friesland Bank (absorbed by Rabobank), but is impossible for the more complex SNS Reaal Group.

As FT Alphaville puts it, the SNS demise was an accident waiting to happen. While bank board and supervisor were doing their utmost to save the bank, the losses and problems were just too much. In this respect it should be noted that in these years, the politicians did a good job at confusing and complicating the financial markets with their prolongued sovereign crisis. In combination with all the post-financial crisis measures, this meant that there were no buyers or parties in the market that would be interested in helping solve the SNS problem. At the same time, SNS could benefit from the crisis by using ECB-funding to buy time.

Essentially we can see that the years 2011 until the beginning of 2013 all eyes were focused on getting to save SNS Reaal. And in that time the so-called Intervention-law (allowing nationalisation) was also being developed and ratified. It think that this law and the principles of trying to seek a private solution within its regulatory framework, focused the minds of all persons involved, whether bankers, supervisors or civil servants.

But is it the endgame that matters?
We should note that the true accident happened in 2006 when SNS did not limit its risks when taking over Bouwfonds Propery Finance. In doing so they exposed themselves to a continued drain on their profits and capital, which they were unable to neutralize. When the financial crisis further evolved and lead to a further worldwide change in risk and capital attitudes, the situation had essentially become unsustainable. SNS Reaal had become, in the Netherlands, the elephant in the room, that no one dared to discuss.

This leaves us with an interesting but highly hypothetical scenario. What would have happened if, at the end of 2010, the supervisor and Ministry of Finance would have stepped back a bit further. Suppose that they would have outlined that any resolution for SNS Reaal Group would have to occur in a stressed market. Which is a market in which it is hard to expect to get a good deal. And thus, they could have argued, while the financial stability of the market was not (yet) at stake, nationalisation of SNS Reaal or ringfencing of some of its activities were essentially the only two options in 2010.

My guess is that the public might have resented such an approach as being too premature. Yet, if we truly wish proactive supervision, we must also be willing to allow unexpected and early interventions, rather than just the end-of-the-road nationalisations. And it is in this respect that the current Intervention law doesn't help. It details a roadmap for the last part of the journey of a bank in despair, and thus focuses all energy of the involved players on remaining within that roadmap. As such it blocks and diverges the attention from other solutions that might have been possible and useful on the earlier bits of the road.


Financieel Erfgoed op de Kaart: opening digitaal museum over financiële geschiedenis

Vandaag lanceer ik officieel de site: 'Financieel Erfgoed op de Kaart'. Dat is een online 'virtueel' museum, dat de financiële geschiedenis van Nederland ontsluit op basis van de lokatie (Google Maps). De verhalen uit die geschiedenis zijn te vinden door in te zoomen en te klikken op de i, of door het menu rechts onder Amsterdam verder uit te vouwen en een informatiepunt te selecteren.

Ik heb Financieel Erfgoed op de Kaart gelanceerd om de verborgen verhalen uit de Nederlandse financiële geschiedenis op één plaats te ontsluiten en bewaren. Overal in het straatbeeld zijn namelijk nog sporen te zien van de financiële geschiedenis. Maar de verhalen erachter zijn niet altijd meer bekend, terwijl ze toch nog steeds boeiend en relevant zijn.
Foto: P. Louw, 2005
Neem bijvoorbeeld de Munt in Amsterdam. Dit gebouw is slechts één jaar in gebruik geweest voor het slaan van munten. Het gebouw brengt ons terug naar 1672 waarin Nederland onder de voet werd gelopen door Frankrijk, Engeland en twee Duitse prinsen.

 In feite bleek toen dat Nederland, als klein land, voor haar zelfstandige voortbestaan altijd erg afhankelijk is van de omringende landen en er het beste aan doet zich te voegen naar de dynamiek van de grote buurlanden in Europa: een inzicht dat ook nu nog steeds relevant is.

Op www.financieelerfgoedopdekaart.nl kan een bezoeker vanachter de PC thuis een 'wandeling' door het financieel erfgoed maken. En wie zélf op pad in Amsterdam is en de site op de smartphone opent, ziet de informatie over de meest nabije historische plaatsen getoond in een menu. Ook kan de augmented-reality toepassing Layar worden gebruikt. Op dat moment fungeert de stad feitelijk als openluchtmuseum.

In dit digitale musuem staat het verhaal van de financiele geschiedenis centraal. Per lokatie komt een deel van die geschiedenis aan bod: een persoon, een gebeurtenis, een gebouw of een organisatie. Op elke plek wordt informatie en audiovisueel materiaal gebundeld die normaal gesproken op allerlei afzonderlijke plaatsen te vinden is: de archieven van financiële instellingen, foto's uit de beeldbank, kennis uit wetenschappelijke artikelen, de collecties van musea, gedenkboeken, wikipedia enzovoorts.

Het platform richt zich nu nog op Amsterdam en is tot stand gekomen in samenwerking met het stadsarchief Amsterdam, het Amsterdam Museum en het Joods Historisch Museum. Het zal door samenwerking met universteiten, lokale museau en historische kringen in de komende jaren uitbreiden naar andere plaatsen in Nederland.

Daarnaast staat ook een Engelstalige versie op stapel, vooral gericht op de buitenlandse bezoekers/bewoners van de stad Amsterdam. In het Comité van aanbeveling voor dit project hebben zitting: K. Knot (President van de De Nederlandsche Bank), E. van der Laan (burgemeester van Amsterdam) en J. Jonker (Hoogleraar Bedrijfsgeschiedenis Nederlands Economisch Historisch Archief).


Over Occupy en de geschiedenis van het Beursplein

Zojuist heb ik op Beursplein 5, bij de manifestatie GlobalNoise, een korte toelichting gegeven op de geschiedenis van de gebouwen aan het plein. Die manifestatie vindt plaats, één jaar nadat Occupy op 15 oktober op het Beursplein van start ging. Het leek me leuk om daarom wat elementen uit de geschiedenis naar voren te halen die verwantschap vertonen met Occupy.

Eén van de zaken die de Beurs van Berlage bijvoorbeeld zo uniek maakt is dat het als Gesamtkunstwerk is opgezet. Berlage besprak met de dichter Albert Verweij het beeldprogramma. Daarin zaten twee doelstellingen:
1- het neerzetten van Amsterdam als handelsstad door de eeuwen heen
2- het vooruitwijzen naar de toekomstige klassenloze maatschappij zonder geld.

In feite bouwde de geengageerde socialist Berlage een gebouw voor de handel, vanuit het ideaal dat op termijn die handel er niet meer zou zijn en het gebouw dan een tweede leven als gemeenschapshuis zou kunnen gaan krijgen. De architectuur modelleerde hij dan ook naar de middeleeuwse raadhuizen van Italiaanse stadsrepublieken (Palazzi del Populo) waarin een duidelijke rol voor het volk was weggelegd. Maar je zou ook zomaar kunnen zeggen dat het op allerlei manieren een Occupy-statement avant la lettre was.

De buitenkant: beursplein?
In de gevel van het pand, aan het Beursplein zijn beide doelstellingen te herkennen. Helemaal bovenin de gevel zien we het wapen van de stad Amsterdam (de twee mannen in een boot) en iets daaronder een gevelsteen van Lambertus Zijl met drie delen: Het paradijs (links), het Verdorven Heden (rechts) en de toekomst (midden).

De binnenkant: tableaus verleden, heden en toekomst
Als u zich voorstelt dat het cafe aan het beursplein er niet was en ook de toegangen niet waren afgesloten, dan heeft u een beeld bij de ontmoetingsruimte waar de handelaren elkaar tegenkwamen. Ze verzamelden zich bij de diverse tableaus van Toorop. Maar dat waren niet zomaar tableaus: ook hier bleek een visie op verleden (slavernij: vrouw wordt geruild tegen zwaard):

In het heden van destijds (1903) zagen we een klassemaatschappij terug, uitgebeeld door arbeiders enerzijds en directeuren anderzijds:

En rechts daarvan zagen we het eind ideaal. Geen klassenmaatschappij. De oude arbeider rechts bergt zijn spullen op en ziet toe hoe zijn kinderen gezamenlijk dansen in een tuin waar man en vrouw gelijk zijn.

De hand en geldzak tussen twee beurzen
Ook in 1903 was er al het besef dat je met geld eervol moest omgaan. Om de handelaren daaraan te herinneren was er tussen de Koopmansbeurs en de zaal voor de Effectenbeurs een geldzak te zien , met daarboven een hand. De hand had de vorm van een hand die een eed zweert. Deze morele oproep werd echter weinig gewaardeerd door de handelaren en de hand/geldzak werden verwijderd.

Gauw verhuizen dus....
Het zal niet verwonderen dat met deze overdaad aan symboliek (en, dat moet gezegd: de beperkte ruimte en de gebrekkige verwarming in de Beurs van Berlage) de effectenhandelaren na verloop van tijd gingen omkijken naar een nieuw gebouw. Toen het contract afliep en hun portemonnee na een aantal florissante jaren goed gevuld was, kochten de handelaren het Bible Hotel aan het Beursplein op om op die plek een mooi gebouw te laten bouwen, zonder al te veel socialistisch-idealitische symboliek.

Meer daarover een andere keer.....


Sneak preview of the Amsterdam Waldorf Astoria: former head-office of Bank Mees and Hope (and NOB)

Next year, it is precisely 400 years ago that the Amsterdam city council decided to expand the city by creating canals. It is one of the very early examples of city planning and thus, the 17th century canal ring is officially listed as UNESCO world heritage site. Over time, the canal houses were the houses of rich families of merchants, bankers and slowly turned into the premises of banks.

Bank Mees en Hope hoofdkantoorThe Herengracht 548 for example, was the house of a merchant but later in its history turned into the head offices of the Nederlandse Overzeese Bank (NOB) and after the merger with Mees and Hope Bankiers: Bank Mees en Hope. Of course these head offices at the canals were something of a status symbol. But at the same time, the architects in the 1970s didn't hesitate to redesign a lot of the interior of the building, in order for the bank to be representative but productive as well.

This weekend I could take a look myself as the new owner: Waldorf Astoria, opened its premises during the Open Monuments Day. And so I could have a sneak preview from within a building that's still being renovated, that I am happy to share with you.

Have a look at: the green and beautiful garden (under which we find a parking garage), some marble pillars from the 1970s, the vault, still with safe deposits (which will become a bar), the period room, the beautiful hallway with sculptures and last but not least: the future front door of the Waldorf Astoria.

Front door of Waldorf Astoria Amsterdam


The art of reserve banking (at the Zuid-as Amsterdam) !

Reserve Banking is an art. While Draghi and Bernanke are highly qualified and professional economists, they also master the art of performance. As true actors, they use their voice, their remarks, eyebrows and somewhat vague statements to provide hints and indications that the market then swiftly responds to. It is something you can't learn from the books. It's an art that can only be mastered in practice.

Since this year, the Zuid-As in Amsterdam is also home to the art of reserve banking. But it's a bit different. I heard about it yesterday, when visiting the Holland Financial Centre. From high up in the nearby Symphony building I looked down onto a small rectangular area of the Art Reserve Bank, well fenced, with cameras and three small office buildings. One is the minting press, the other is the teller and the third one was hard to identify. It looked like this:

The Art Reserve Bank: an experiment
What happens there is a unique experiment. A group of artists have set up, without any monetary funding, a so-called Art Reserve Bank. The plan was there for some time, but as the financial crisis came along, it became easier to convince sponsors to join a project that questions the value basis of money. The main idea is that there is far too much money circulating in the world and that the crisis demonstrates that we need a new approach towards money and debt. And in the experiment, art (or: the intrinsic value of human artistic expression) becomes the money. And thus helps to freshen up or minds and stimulate us to re-think our concept of money.

The idea is that for a period of five years, each month 400 coins are minted. These are 4 series of 100 coins per week, costing 100 euro each. For each month: a different artist is asked to design the coins, which all bear the same backside with the motto: ARS PECUNIA MAGISTRA: Art is the teacher of money. A nice motto and also a tongue-in-cheek reference to the Amsterdam Zoo that bears the motto: Natura Artis Magistra (Nature is the teacher of Art).

Anyone can buy coins and thus becomes a member of the Cooperative Art Reserve Bank (Kunstreservebank). All holders of the coin are thus the collective owner of the bank. Of the 100 euro costs, 90 % is used to pay for the operational cost of the experiment and 10 % is withheld as a 'cash reserve'. Should a buyer not appreciate his/her work of art, he can return it to the bank and get the original value back with a 10% interest fee. There is also a dealing room on the site of the bank, for those who wish to buy or sell their coinst. And at the end of the five years, all owners of coins can collectively decide what will happen with accumulated capital (if there is any and if the bank stil exists).

Money, dreams and art
The experiment challenges one to consider: what is happening in our world of money and value?

For me, the Art Reserve Bank made me realize that there may now be so much difference between their coins and the official legal tender in circulation. Both coins are the product of our imagination, dreams and creativity. Which is quite clear for the Art Reserve Bank currency, but may be less clear for the euro. So let me try to explain.

What happened over decades is that we moved from a mentality of: save first, spend later, to a mechanism of: spend first, repay later. If your story about the future would be probable enough (having a job, education etc) some bank would lend you money. And the same thing was true for businesses. Essentially this is a mechanism where tough choices are made. If you don't have the job or a solid story explaining how you can repay in the future, you don't get money. Which all sounds very realistic.

Fact is however, that with hindsight we can now see that banks, consumers and companies have on a large scale lived in dream worlds with expectations of future income, growth that were not realistic after all. Money was created, lent on the basis of these dreams and imagination. And part of that money is now in our pocket. And we also know that some of the debts are definetely not going to be repaid in the future.

So wouldn't it be fair to state that some of our euros are just as much the result of our imagination, as the Art Reserve Bank coins?


Charging bull sudenly lands in Amsterdam....

Just last week, the Amsterdam city and its inhabitants were taken by surprise. Early Thursday morning, the 5th of  July, the famous charging bull of Wall Street had suddenly landed on Beursplein 5: the square where NYSE Euronext operates the Amsterdam stock exchange. It was a present of the artist Arturo di Modica, who felt that our stock markets could use some positivism and a new impulse.

Charging Bull in front of
Beurs van Berlage, Amsterdam
foto: Simon Lelieveldt
The illegal placement of the Raging Bull led to some discussion with the city authorities. While the initial response was that the bull had to be removed, they later reviewed their
stance as they realized the opportunity it provided. It is after all, the third bull placed in a financial district. The Wall street bull turned into a tourist attraction and so did the one that was placed in Shanghai, a couple of years ago.

I would say that the artist chose his moment wisely. Here in Europe we are in for quite a turbulent period. In the next months and year we will find out if and how all the eurocrisis measures are going to be implemented. And one thing is for certain: with all the budget cutbacks, predicted contractions and slow downs here in Europe, the business and investment climate can defintely use an impulse.
Charging Bull at Beursplein Amsterdam

Meanwhile I am a bit puzzled by one thing. It was only in March of this year that the artist had announced (when he was in Dubai) that he was working on a third bull. In fact he was quoted saying:
“I am working on another Charging Bull which will be placed in the United Arab Emirates and complete the triangle of peace and prosperity".

So perhaps it's best to cherish this Charging Bull here in Amsterdam before it becomes a travelling bull that leaves for the warmer climate in Dubai.


Google Street View now also covers the inside 'streets' of the Palace on the Dam in Amsterdam

As many may know, the Palace in Amsterdam wasn't really a palace when it was built. It was the city hall of Amsterdam. And as I was using Google Maps to locate the building I noticed a green arrow on the Dam. And it had an interesting button: street view:

Curious as always, I clicked on the button to end up with the 'street view' from the interior of the Palace. I hadn't noticed this before, but I remembered some generic announcements about Google Street View inside buildings, last year. And it's a neat and great feature indeed. One can visit and watch the different rooms in the Palace and their decorations at ease. And this also allows for an off-line preparation of a visit to the palace. See for example the view in the center hall:

So I can only encourage you to try it for yourself. If you wish to proceed to the different corners of the building is, you can try to get there using GoogleMaps. But it is way easier to just follow this link to the Google Art Project Page for the Amsterdam Palace.


45 years ago: bankgirocentrale en betaalcheque announced

On this day, 45 years ago, the commercial banks in the Netherlands announced that they were going to set up the bankgirocentrale, a clearing platform for interbank payments. And while they were at it, they also announced the introduction of the betaalcheque, to facilitate point of sale payments by means of a cheque and cheque card. These announcements marked the beginning of the collective move of commercial banks to gain foothold in the retail market and penetrate the retail market with current accounts.

It should be noted that the decision to introduce a cheque payment system was inspired by the existing alternative of the credit-card. Banks had seen the cost involving the payment with credit cards and did not wish to penalize the shop owners with transaction fees of 2-5% of the amount paid. So they chose for the paper based system of guranteed cheques. This system existed 35 years and was abolished with the introduction of the euro.

Now, when in the 1980s technology had evolved and credit-cards moved to Europe, the threat of credit-card based Point-of-Sale systems made the Oil Companies of the Netherlands push the banks into building a Dutch point of sale system. And while it did take some time, we eventually ended up with the national PIN-system, as of 1987. And exactly this week, the system has seen its last transactions and is replaced by international debit-card systems.

It is interesting to see how the life-time of the cheque-system was 35 years and that of the PIN-system some 25-odd years. And while the credit-card penetration in the Netherlands is still comparably low, it is the mere threat of the expensive credit-card system that has made us introduce some inexepensive own Dutch-flavoured payment systems.

Bankgirocentrale building at Sloterdijkkade 22


Floriade.... and its link to payment history

Today the Dutch Floriade 2012 has opened its doors in Venlo. And that reminded me of the Floriade Amsterdam, which was held in 1972. Few people will know that the Floriade of 1972 has a link to the Dutch payment history. Because it almost became the place were the first electronic payments at the point of sale could have been trialled. So what happened in those days....?

In the early 1970s there were some discussions about a possible merger of the Amsterdam Municipal Giro (Gemeentegiro Amsterdam, known as GGA) with the Dutch national Giro (Postcheque- and Girodienst). While the national regulators wished the GGA to become part of the National Postal Giro, the City of Amsterdam was very much opposed to that idea, since the GGA generated a nice revenue. And its director Stofkoper, did everything he could to ensure that the GGA could prolong its life as an independent organisation. And for that, he chose the path of innovation into modern electronic payments and banking.

Stofkoper invested heavily in study trips to the USA and made sure that the GGA was the first to test and adopt new technology. And for the Floriade of 1972, his true goal was to set up an electronic payment system. So he discussed this idea seperately with the technical people of Bijenkorf and Albert Heijn. He tried to convince them to quickly join in this pilot, suggesting that another interested party would also be willing to step in this pilot and demonstrate an innovative approach.

Unfortunetely for the GGA however, the technical staff of Bijenkorf and Albert Heijn were in contact with each other and found out that they were both being courted. And as the idea of setting up a closed-circuit payment system was still too fresh and new to them, they choose not to participate. So the GGA did not have the  from then on the GGA chose to focus on alternative uses of the new technology. And in 1976 it became the first to provide all its customers with the possibility to withdraw money from an Automated Teller Machine, using a 'betaalkaart'.

Now, for those interested in film and photo's of the early days; there is a five-part film around on Youtube that provides nostalgic footage of the Floriade 1972.

And for those that are more into the old-school black and white pictures, I would suggest to look at these foto's of the Amsterdamse Beeldbank:



Rabobank takes over Friesland bank... inevitable consequence of scale and business model

Today, all the financial news in the Netherlands is dominated by the takeover, by Rabobank, of Friesland Bank. Both are banks that originated in the agraric sector, as cooperative organisations that support local farmers and communities. As such Friesland Bank was the only remaining independent cooperative bank still standing. But now, the Competition Authority has immediately granted an 'express decision' to allow the merger between Rabobank and Friesland Bank. This means that the financial situation was serious and we may assume that the Dutch central bank (as a supervisor) chose to stimulate this merger between Rabobank and Friesland Bank (as is - in historical terms - their preferred way of keeping the bank sector healthy).

Now if we look at the earlier annual reports of the Friesland Bank we can see what was going on. Over the last five years, the majority of increase in income was due to the private equity function of the bank. So Friesland Bank was a bank and a private equity house at the same time. With the private equity part blossoming in the recent years, while at the same time being a risk factor. Meanwhile, Friesland Bank in some areas (for example processing of securities transactions) needed to cooperate with other banks to ensure a good provision of services. And then, when the market outlooks became more grim, the bank as a whole seriously suffered from the fact that 1) new banking rules led to a higher capital requirement for private-equite activities 2) the revenues of investment went down alongside the general gloomy outlook in markets and investments.

What is interesting is the tempo in which this take-over occurred. Because in essence, the risk profile of Friesland Bank (low revenue generating bank with risky private equity holdings) is of course no surprise to Supervisory Board nor to its supervisor: De Nederlandsche Bank. So one might wonder: what took them so long? What happened?

I think it's the combination of cultural and personal factors that may have slowed down this take-over. For that to understand, we must recognize that the Frysian Province of the Netherlands is a region with a healthy proud, and sometimes stubborn, attitude as to their uniqueness. They succeeded in getting their language to be maintained as an official administrative language in Friesland. They have the unique 11-cities skating race and many more customs. And it may have been this regional pride that may have stood in the way of their Supervisory or Executive Board of accepting the inevitable.

So while there is a lot more to say about this episode, it is fair to state that the Dutch central bank may now -after a number of well-criticized failures- pride itself in having safely managed and seen this transition though.


Blurring the faces of the statues at the entrance of the NHM building

I am currently busy contemplating different ways to share my passion for banking and history with the world. Not just this blog but also books and e-papers on the web. And while surfing about, I did notice a peculiar thing in Google StreetView. It happened when I looked at the Streetview for the front door of the Nederlandse Handel Maatschappij, located at the Vijzelstraat in Amsterdam:

I am not sure if you can see it, but in an effort to blur the faces of all people that accidentally make it to Google-Streetview, Google has decided to also blur the faces of the statues Europe and Asia.

But I am pretty sure that these ladies won't mind, so here's an unblurred version:


At the Amsterdam City Archive

There is great stuff to be found in the Amsterdam City Archive. I stumbled, for example, upon a foto series, made in 1998 to promote Amsterdam as the financial city centre. The Image Bank of Amsterdam has it all. See below:


Koepel de Stoop rest on the pillars of the exchange of Hendrick de Keyser

As some of you may know, I am quite busy researching and documenting the financial history of Amsterdam. And just today I stumbled accross an interesting find. It all started with the book `Woordenschat, verklaring van woorden en uitdrukkingen' of Taco de Heer en E. Laurillard, dating back to 1899. This explanatory dictionary, edited by Ewoud Sanders contains all kinds of expressions of the Dutch language. As such it is already one of the treasures of the Dutch language of the 19th century.

My eyes fell on the description of the word 'Paalgebouw'  (litterally: building on Pillars). This nickname was given in Amsterdam to the temporary exchange that could be found on the Dam, between 1836 and 1845. Now what intrigued me is the additional description that I read. It said: 6 of the old Pillars of the Exchange of  Hendrick de Keyer are now supporting a domed roof of the homestead of J.B. Stoop, at Woudenberg (near Utrecht).

So with the help of technology (mostly Google, I must say), I ventured out and discovered that there still is a place called the Stoop Dome ('Koepel van Stoop') near Woudenberg. And with the use of this location in Panoramio, I ended up with the picture below:

Well, look at that, those pillars might be all that's left of the Stock Exchange of Hendrick de Keyser. And while one site claims that this is a myth, the Dutch Monument Register contains a description confirming that these pillars are quite likely to have come from Amsterdam. See also this more detailed article.


Stock Exchange de Keyser: maquette by Capital Amsterdam

Here in Amsterdam we can pride ourselves in having traded the first shares in the world. This occured at the Stock Exchange of Hendrick de Keyser. The exchange was located at the Rokin and built over the water as the picture below demonstrates.

The location of the exchange was quite near the Dam and the Amsterdam Exchange Bank ('Wisselbank). I have made a small picture to outline its location on Google Maps.

Now what's very nice is that last year, Capital Amsterdam took the initiative not only to publish a great commemorative book on Amsterdam (Capital Amsterdam) but also to disclose the maquette that they had built, based on the old records. And I was of course keen to film it (with my camera, so it's not a high tech movie, but it does the trick) with the result below. I hope it helps to give a better impression of the building.



OECD data demonstrate income inequality and support Occupy

When I first read about the Occupy movement I focused primarily on the US situation. I came to understand that indeed in the US, the income inequality is quite considerable, so I could really see where the objections of Occupy Wall Street, and the use of 99% (for the masses) and 1% (for the wealthy) were coming from.

But here in the Netherlands and in Europa, I figured, it would not be the same. We have more social insurances and social support and income inequality is dealt with differently. At least, so I thought, until I came across the OECD report: An Overview of Growing Income, Inequalities in OECD Countries. And I'll put the two foremost important graphs down here, for a quick snapshot.

The first image shows the gradual liberalisation of the markets in the OECD-countries. And it is followed by an outline of the increase (!) in income inequality in that same time-frame.

Of course the OECD goes at length to describe how this mechanism has worked. But if I were to summarize it, I would say: with the liberalization of markets, capital can flow more freely than labour. Thus, those who only have labour to sell, cannot find their optimum earning capacity (due to a restraint in terms of travel etc.) while those who have capital can. And therefore the liberalisation of capital markets (without a similar liberalization of labour markets) will go hand in hand with an increase in income inquality.

And as the neoliberal dogma is indeed the dominant frame of reference in our western societies, it is fair to say that the OECD data prove the Occupy movement to be right in their objection to unlimited capital flows and in their desire to compensate the income inequelity effects of these flows by means of other political measures.


The evolution of commercial banking in the Netherlands (rise and demise of ABN AMRO)

While preparing for a lecture on bank history, I ran into this excellent working paper by Joost Jonker that summarizes the history of commercial banking (read: ABN AMRO). It's title is: Scale at any price and its subtitle: The rise and predictable demise of ABN AMRO, 1960-2006.

It describes how the essential flaw for ABN, AMRO and ABN AMRO was that the company did not pay sufficient attention to creating a sound cost- and funding basis. Although the retail part of ABN AMRO grew considerably in the 1970s, the cost/income ratio was left unattended and it never really grew into a universal bank. So in the Netherlands the company became a conglomerate of business lines with little insight into its own cost-structure. And then after 1990 the company chose to further expand, while it's internal house wasn't sufficienly in order.

Jonker describes a picture of a company that is unable to get its fundamental operations and cost/income under control, and concludes:
These elementary mistakes were compounded by the profound mismanagement under which ABN AMRO suffered from 2000: the wilful changes of strategy, the continuous and pointless reorganizations, the inability to cut costs, the ludicrous and expensive pretentions of global excellence. Unable to keep pace with its self-defined goal, the top echelon of international banks, ABN AMRO forced itself into a continuous flight forward, justified by apocalyptic visions of an imminent endgame. When that end seemed near the board rushed ahead to get the best deal possible, arrogantly thinking it could control what was really a sell-out.

By now we know the consequences: A sell-off of south American and Italian business to Banco Santander. A take over of the Dutch wholesale-activities by RBS. But RBS, it turned out, was at that point in time not fully ready (or able) to execute such a takeover, according to the FSA. And similarly, Fortis made a leap of faith when choosing to take over ABN AMRO as a member of the consortium. So Fortis ended up being saved by the Dutch state, with the condition that the former HBU-activities be sold quickly (to Deutsche Bank it turned out).

The whole process is one of creative destruction (as Schumpeter would call it). Which essentially means that  there is a re-assembly of old businesses into new forms/shapes. For the banks involved, it means they are going back to basics, re-orientating towards solid cost/income ratios and customer satisfaction in a renewed competitive landscape.


Dutch Point of Sale system PIN ceases to exist...

This new year brings with it another historic moment. The PIN-system for Dutch cardpayments disappears. Here in the Netherlands, we had one of the cheapest and efficient implementations of point of sale payments: PIN. But the evolving technology (chip), fraud figures for magstripe as well as the increasing internationalization (European integration) made us migrate to Maestro instead. Of course this is Maestro with a Dutch flavour because the Dutch merchants have negotiated a good prices deal with the collective of individual banks.

Just for fun I figured I would provide a picture of one of the earliest operational debitcards in the Netherlands: a 'Geldkaart' issued by the Gemeentegiro (kindly provided by John Gigengack). So you can see where it all started here:

For the consumer the migration means that he or she has to dip the card rather than swipe it. And on the online-banking systems and account statements they may notice that the payments in some cases are no longer directly debited but first 'reserved' to be finally debited and booked some days later. Other than that, I expect that to the consumers the concept of PIN is not so much related to the brandname PIN but to the use of a card with PIN-code. So to them PIN may disappear but they keep on 'pinning'.