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DNB-PVK merger set for OK despite pension row

NETHERLANDS - The Dutch lower house of parliament will vote on the government’s proposal to merge the Dutch central bank and pension regulator on Tuesday September 7.

The merger between de Nederlandsche Bank and the Pensioen- & Verzekeringskamer is expected to be approved after the government gave ground on a number of issues that centred on the pension rights of the merged entity’s directors.

An agreement between the government and parliament was hammered out last week when the debate on the merger went to a rare fifth round after finance minister Gerrit Zalm was forced to concede a number of points to get the legislation through.

The pensions question became a crucial element of the debate after it emerged from details released as part of the merger arrangements showed that the governors of the bank and regulator enjoyed pension privileges while demanding stringency from the rest of the working population.

The key points at issue focused on the pension rights of the directors of the merged entity. During the debate Zalm agreed to place on hold the possibility that directors could accumulate extra pension rights by working longer.

“This means that directors will not be able to get additional pensions of up to 70,000 euros per year per person paid for by the central bank,” says Dutch parliamentarian Pieter Omtzigt. Omtzigt, although sitting for the Christian Democrats (CDA), the largest party in a governing coalition with Zalm’s Liberals (VVD), led the charge against the directors’ pension privileges.

The government also agreed to commission new independent research to establish for a reference salary for the central bank directors. Their salary is currently in the €312,000-390,000 range, established solely with reference to commercial bank salaries. The reference group is be extended to include other central banks and the Dutch public sector; the Dutch prime minister, for example, earns €123,000. In future ministers will have to approve salaries above ministerial level on an individual basis.

“The research will also be extended to pension rights and will be delivered to parliament together with an opinion of the minister of finance before the next shareholder meeting,” Omtzigt notes.

In response to a question put down by Omtzigt at an earlier stage of the debate, the government agreed there would be greater transparency on internal documents and some 150 pages of documents pertaining to salaries and conditions of the merged entity’s directors will be declassified. In addition, Zalm agreed to send a letter to parliament later this year outlining how the DNB pension fund will be separated from DNB control.

“I had asked why it would still be possible for somebody to be active in pension fund supervision and at the same time be on the board of the DNB pension fund and had asked for it to be taken over by ABP,” Omtzigt says.

Zalm also agreed that ex-PVK staff will be moved from a final salary pension to an average salary pension. DNB is already on an average salary scheme.

“In addition, the minister conceded that in principle there will be no extra payments to the pension funds over the next two years,” Omtzigt says. “I’m very satisfied with this new arrangement,” Omtzigt said.

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