the finance business
high to turn attention to the acquisition of real estate.
In our previous annual report we made reference to the fact that the
Government introduced an amended draft Bill concerning the super
vision of the credit system before the Second Chamber of Parliament.
As is known, this Bill provides for the possibility of fitting the mortgage
banks as an important category of capital market institutions, by a special
regulation, into the ordering of the financial regime in Holland. From
the further memorandum in reply, which was sent to the Second
Chamber of Parliament in the middle of 1976, it appears that for the
supervision of this industry the Government wishes to follow the practice
that has grown with regard to the mortgage banks associated with the
Netherlands Association of Mortgage Banks. In due time this As
sociation can then be regarded as a representative organ in this
set-up.
At the moment negotiations are going on between the Association
and the Ministry of Finance and The Netherlands Bank about the
draft of a regulation.
From the middle of 1975 economic conditions in Europe firmed up.
This recovery, which also continued in 1976, was stronger in the
German Federal Republic than it was in Holland. The German Federal
Republic managed to increase economic activity considerably and to
force back inflation even further, whereas in Holland the revival in
the economy was less strong and inflation continued unabated.
This did not fail to produce its effect in Holland. The high interest
rates in the German Federal Republic as a result of a strongly reviving
economy, the negative real interest rates in Holland and the exchange
profits that could be realized on currency transactions increased the
pressure on the guilder and gave rise to a wave of speculations
in 1976. The Netherlands Bank, which from time to time sup
ported the guilder by extensive interventions from the second half
of May (up to and including the third week of August), defended
the position of the guilder successfully, as turned out later but
could not prevent that the tightening of the money market resulting
therefrom was attended by a very sharp rise in interest rates in the
capital market. The various increases in its official rates must be
viewed in the light of its policy, aimed as it was at strengthening the
position of the guilder, which for the most part stayed at the lower
side of the European currency snake for five months since April of the
year. After these operations had again steered the guilder into
quieter waters, interest rates started to fall in the months of Novem
ber and December. Thanks, partly, to the structural surplus on the
