Friend or Foe? Securitization and the Dutch mortgage boom

The revival of the securitization market lies at the heart of the European Commission’s initiative to launch a pan-European capital market union (CMU). Securitization, as an additional source of funding for banks are considered as the solution of unlocking more investments for all companies, especially small and medium enterprises (SMEs) in the EU.[1] However, questionably as securitization in recent history has been mainly used for funding residential mortgages. This note explores the role of securitization in financing Dutch mortgage boom over the last decade.

In 2013, total Dutch mortgages stood at 111% of GDP in 2013, up from 50% in 1995. The substantial increase in mortgage lending by Dutch banks could not be fully funded with deposits held by households and corporations. This is owing to the fact that large parts of Dutch private savings are in the form of compulsory pension savings schemes. As Dutch pension funds predominantly invest abroad,  the resulting deposit funding gap has forced Dutch banks to increasingly rely on external funding from the international capital markets, for example through securitization.

Securitization involve the bundling of illiquid loan assets, such as residential mortgages, credit card loans, car loans or SMEs loans, and through financial restructuring, transforming them into marketable securities (liquid assets). These asset backed securities (ABS), in particular residential mortgage backed securities (RMBS) can be then sold to investors. This is so called “external” securitization. Due to its complex and opaque nature, securitization has been seen as the culprit in the 2007/2008 global financial crisis.

If we look to the Netherlands, we see that Dutch banks are heavily relying on securitization in comparison to other countries.[2] Prior to the crisis, over one quarter of all Dutch mortgages outstanding were financed by means of “external” securitization.[3] However, banks’ costs of financing through securitizations are not found to be systematically higher in the Netherlands than other countries, according to a report of CPB.[4]

Following the outbreak of the crisis (in the mid-2007), securitization in the Netherlands took place mainly for liquidity purposes (Chart  1 and 2). Such “internal” securitization is not sold on the market but held by the originators for use as collateral in obtaining liquidity from central banks and other financial institutions. The significant increase in securitization totaled a record amount of 137 billion EUR in 2010, including 78 billion in restructured securitizations, in which old securitizations were terminated and the underlying loans were resecuritized. Following the strong dip in 2008 and 2009, “external” securitizations have recovered to some extent. In 2010, investors purchased 22 billion EUR of RMBS originated by Dutch financial institutions.

Chart 1 New securitisations, by type 123 Source:

Chart 2 Outstanding securitisations, by type 234 Source:

The enormous increase in mortgages has made Dutch households the most debt-burdened ones in the Eurozone. In 2013, household debts in the Netherlands stood at 288% of net disposal income, which is higher than Portugal, Ireland, Greece or Spain. The figure was 148% in 1995. Therefore, the danger of reviving securitization may lead to the restart another mortgage and housing boom.



[3] Author’s own calculations based on the statistics retrieved from DNB,


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