* DSB should not have been licensed: commission report
* Commission says management to blame for failure
* Finance Ministry agrees with conclusions
* Bank collapsed in Oct. 2009
(Rewrites with more details)
By Ben Berkowitz and Harro Ten Wolde
AMSTERDAM, June 29 The Dutch finance minster
called for a cultural overhaul of the central bank on Tuesday
after a commission concluded the supervisor should never have
given a licence to DSB Bank [DSB.UL], which collapsed last year.
The tough report will add to pressure on central bank
president Nout Wellink, who has come in for public criticism for
his work since the start of the financial crisis. The central
bank, known by its Dutch initials DNB, issues banks their
The commission concluded DNB made a good judgement about
DSB's financial position when it applied for a licence in 2005,
but that it failed to draw the right conclusion about DSB's
"DNB should have taken the position that fundamental
improvements were needed, before a positive decision about the
(license) request could be made," said Michael Scheltema,
commission chairman and a former deputy justice minister, in the
report that was presented at a live broadcast press conference.
In a letter to parliament, Finance Minister Jan Kees de
Jager said he endorsed the main conclusions of the report.
"The commission has drawn hefty conclusions and
recommendations and deserves a hefty reaction," de Jager said.
The Dutch central bank said it agreed with the minister's
support of the report's main conclusions. Its brief statement
did not address de Jager's calls for a change in DNB's culture.
DSB, which got its licence in 2005, failed after an Oct. 1,
2009, TV interview with a lawyer for a DSB mortgage holders'
foundation. The lawyer suggested DSB clients take their money
from the bank, which caused an immediate run on the bank.
The central bank seized DSB on Oct. 12 after about one-sixth
of the bank's deposits were withdrawn and it faced a liquidity
crunch. It went bankrupt on Oct. 19. [ID:nLC637889]
De Jager said he had asked the Dutch central bank to come
with a plan within a month to change its internal culture.
"The internal supervision within DNB needs to be changed,
for instance via the supervisory board ... the supervisory board
needs to exercise more control of DNB's supervisory tasks. The
law needs to be changed and I will change the law," he added.
Scheltema also concluded that the Dutch central bank failed
in supervising the bank after it had received its license.
"DNB has failed to show its teeth in the supervision of DSB.
Instead it has tried to show its concerns via argumentation and
suggesting changes. DNB should have earlier increased pressure
on DSB," Scheltema said.
But the criticism of the central bank aside, the report
ultimately concluded the core reason DSB failed was poor
governance and unprofessional management.
Though DSB had a small market share in savings -- less than
1 percent of the Dutch market -- it was the most aggressive
advertiser of all Dutch banks and had a much larger share of the
The Finance Ministry launched an immediate probe after DSB's
collapse, focusing on the efforts of both its supervisors and
its politically-connected executives.
Among those who faced scrutiny were Gerrit Zalm, who became
DSB's chief financial officer after 12 years as finance
minister. He left DSB to become chief executive of ABN AMRO
after the government nationalised the bank.
Zalm was cleared of wrongdoing in March, though the
country's market regulator said he had demonstrated a lack of
expertise and should leave ABN. [ID:nLDE6201T5]
(Reporting by Ben Berkowitz, Harro Ten Wolde and Gilbert
Kreijger; Editing by Jon Loades-Carter/Ruth Pitchford)