The segregated bank account: a welcome option for Dutch financial institutions to meet asset segregation requirements
In the proposed Financial Markets (Amendment) Act 2022 (hereinafter “Invoice”, which can be found here), the concept of separate bank account is being introduced for various financial institutions to meet market needs. Both the “Netherlands Authority for the Financial Markets” (hereinafter “AFM“) and the “Dutch Central Bank” (hereinafter “DNB”) repeatedly pleaded for the introduction of a separate bank account, which was also a wish of market participants. Dutch financial institutions now often use a customer account foundation (derdengelden seams) to meet asset segregation requirements. However, this foundation is an unknown phenomenon abroad, making it more difficult to settle cross-border transactions. This is because foreign parties (among others) are concerned that with a payment to a party other than the financial institution (e.g. the foundation), there will still be a payment obligation to the financial institution because the payment would not consist of a valid payment (bevrijdende betaling). In addition, for Dutch financial institutions, establishing and maintaining a client account foundation is resource-intensive and expensive. The option to use a segregated bank account is therefore a welcome possibility for Dutch financial institutions to secure client funds to comply with asset segregation regulations as set out in the Dutch Financial Supervision Act (here). after “FSA”).
The possibility of using a separate bank account to secure customer funds is introduced for payment service providers, electronic money institutions, settlement agents and investment firms. This concept is in line with existing segregation regimes under Dutch financial law. According to the draft law, the segregated bank account must be held in the financial institution’s own name (the account holder), with the reference name of the account indicating that the account holder holds the account in its own name for one or several third parties (e.g. customers), indicating the capacity of the account holder. The funds in this segregated bank account will form a segregated pool for the sole purpose of responding to claims from relevant third parties for whom the funds in the segregated bank account are deposited and, the bank with which the segregated bank account is held, of in the to the extent that such claims relate to the management of the account and to the extent that such claims relate to the deposit of funds at the financial institution. In the event of bankruptcy within the financial institution, the trustee must cooperate with the position of the beneficiaries of the money of the segregated third parties, which also means that other creditors cannot exercise recourse on the balance of the segregated bank account .
The requirements for using a segregated account are (amongst others) (i) the bank account must be held with a bank (with a banking license) having its registered office in the Netherlands and (ii) the financial institution must ensure adequate administration of the segregated assets. The FSA provides for the possibility of regulating the opening, administration and management of the account. This regulation should be inserted in the decree on prudential rules (Besluit prudentiële regels Wft) and Conduct Control Rules Order (Besluit gedragstoezicht financiële ondernemingen Wft).
The ability to use a separate bank account provides an alternative to existing FSA regulations on securing funds held by financial institutions. Settlement agents, payment service providers, electronic money institutions and investment firms can therefore continue to use the already existing methods of asset segregation, but with the passage of the bill, they can now also opt for the concept of segregated bank account. Considering this will promote cross-industry consistency in financial regulation with respect to the protection of customer funds, which is a promising and welcome development.
The bill was published in the Official Journal on May 27, 2022 and will enter into force on a date to be determined by royal decree.