Payment in full of share capital
We have thought fit to give ample information in our report on
the developments in our company in the international field. In this
connection the payment in full of the share capital, which was
effectuated in the middle of 1978, is of great importance.
A strong and transparent capital structure, such as we now
possess, has in the past year already proved to be of essential
importance for the image and the finance potential of the FGH
abroad. This applies both to the issue of mortgage bonds in
foreign countries and to the financing of foreign real estate
activities.
'Wet Toezicht Kredietwezen'
On 1st January 1979 the new 'Wet Toezicht Kredietwezen' (Act
concerning the supervision of the credit system) came into force,
which afforded a place to mortgage banking in the financial
ordering in the Netherlands. As we already explained in our
previous annual report, only those credit institutions and other
institutes which mainly cover their finance needs by funds with
a shorter term than two years, fall under the direct operation of
the Act. However, the Act contains an article which provides that
by Order in Council certain categories of capital market institution
- which mainly cover their finance needs by funds due and payable
at terms of two or more years - can be placed under the business-
economic supervision of The Netherlands Bank in order to protect
creditors' interests. This supervision will be exercised on the basis
of standards to be imposed with regard to liquidity and solvency.
In the case of the mortgage banks such an Order in Council has
come into force with effect from 1st January 1979. In this decree
an attempt has also been made at bringing the term 'mortgage
bank' under a definition.
We take a positive attitude towards this development because it
provides a legal basis for a branch of industry which has long
proved its right to exist. We do realize, though, that incorporation
into the financial ordering involves certain restrictions to our
industry. Thus, the possibility of attracting funds with a term of
less than two years within the framework of the cash policy is
now tied to certain limits. However, these restrictions would
not be of such a nature as to hamper the sound growth of the
industry. For this reason the supervision of the standards of
solvency and liquidity by or on behalf of The Netherlands Bank
will, for the time being, be based on the rules that have so far
been observed by the mortgage banks. The amendment of these
rules will in the time to come be the subject of consultation
between the Association of Mortgage Banks and The Netherlands
Bank.
Passive finance
During the first few months of 1978 the capital market presented
a stable picture. Long term interest rates dropped until in the
month of May the first signs of renewed currency unrest presented
themselves.
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