The successor to Wellink: why I think van Dijkhuizen is the best for the job !

These days, decisions are in the making about the best man to succeed Wellink as the President of De Nederlandsche Bank (our central bank). There are three candidates for the job: Hoogduin, Kremers, en van Dijkhuizen. Whereas in former days, the President used to be responsible for both monetary and supervisory matters, the Minister of Finance, JanCees de Jager, is now choosing for a separation of duties (see here Dutch source 1 and here Dutch source 2). Due to the failures in Dutch banking supervision of the last years, there will be a separate executive director responsible for bank supervision. That director can independently judge and committ the whole central bank board (and its President). And as to the general set-up for bank supervision in the Netherlands, I am amazed at the following statement of the Ministry of Finance:

The Minister trusts very strongly on the internal systems of checks and balances of De Nederlandsche Bank (DNB) and the Authority for Financial Markets (AFM). Both supervisors are themselves responsible for the proper functioning of their internal governance, the legality of their expenditure, the execution of supervision and the determination of priorities and accents of their work.

I find the above quote highly interesting and surprising because things haven't gone that well at the two Dutch supervisors of financial institutions. Too much money has been billed to the institutions under supervision, which had to be corrected by the administrative judge in an appeal (while the Ministry of Finance and supervisors for years ignored the complaints of representative organisation that highlighted this excessive billing). Three banks have failed, not the least as the result of a strong monoculture at the prudential supervisor, DNB. And the AFM has shot bullets as well as blanks by using open norms on anything that moved. So with a Ministry of Finance that doesn't change any of this and just trusts those supervisors to continue doing their job well, we don't have to wonder why the Netherlands will be quite likely to soon face another financial crisis or failing bank. Perhaps the only positive thing that we can say for the Ministry of Finance is that at last, they have formulated some sort of vison on supervision 0.1, because so far it was the only Ministry in the Government that hadn't done its homework properly.

Yet,it might also be the case that the Ministry does not aim to steer policies by a proper structure, but by manning the supervisors with the proper President. It might be this choice that underlies the choice of the Ministry for Ronald Gerritsen, currenty it's own secretary-general, for the role of President of the Authority for Financial Markets (AFM). And similarly one might expect a choice for Kees van Dijkhuizen (former Treasury of the State, just as Wellink was), for the new boss at DNB. But let's not rush too much with my personal preference.

Apart from all the above, we have to be aware of the challenges for the successor of Wellink. The first one is that he (a she could not be found apparently) needs to work with an impossible governance structure in which a pigheaded Director of Supervision can committ the whole DNB-board without consulting them in advance. Second of all, the new President needs to be someone who is able to change the internal culture at DNB from a Kings-Court attitude to more street-wisdom. it must be someone that not just thinks, or prefers study of legal implications, but is also able and willing to act. So we are looking for a pro-active and inspiring leader, with sufficient political flexibility and insight.

Looking at the candidates it is obvious that not all of them are known to the public. Hoogduin, is an abstract macro-economic expert and doing very well in that role. But it is also clear that the analytical approach isn't suited to the public and staff: it's not the man to inspire staff with a warm / human vision and he appears to be less able in communicating simple messages to the public at large. In his way of work he is thus quite likely to condense problems into a set of mathematical equations of an economic logic, which dictate the outcome in the long run. Finally it is unknown whether his political antenna is sufficiently well tuned. 

Kremers is the architect of the current supervisory (Twin Peaks) system. After his job at the Ministry of Finance (in the nineties), he joined IMF. From there he congratulated the Ministry with te well chosen twin peaks regulatory system. In fact, he thus complimented himself over a distance and this was quite embarrassing to watch. It is unclear what job he holds exactly at RBS, after the merger. He does fit the criterion however, that he used to work at the Ministry of Finance worked. And he will also be politcially versatile, though lacking in hands-on experience. He seems too self-involved in his mental ideas and recipes. Placing him in the chair of President of DNB, means that DNB gets a new version of a mastermind at the top who has an audience bowing for his great thoughts. It is exactly this symbiotic groupthink relationship between Wellink and his staff that needs to be changed and with Kremers, it seems unlikely that his unhealthy relationship between leader / staff will change. So Kremers is not the right candidate, although many may say he is the right man because of the increasing importance of avoiding systemic risk (and relationship with the IMF).

Finally, Kees van Dijkhuizen. He worked as the Dutch Treasurer and then at NIBC, which wasn't the most obvious choice as it was a bank in special circumstances and trouble (takeover by Kaupthing didn't succeed so NIBC is still in the hands of a a consortium of JC Flowers). He actually worked there in silence, introduced a new consumer savings account (NIBC Direct), to broaden its funding, and made some steps into expansion abroad. All are quite healthy and logical steps, and what appeals to me in this is the hands-on nature. Dijkhuizen, then, is the only candidate that demontrates his ability in hands-on management in both public and private sector, surrounded by complex political, macroeconomic and market dynamics. It seems to me that the richness and diversity of qualities you need to succeed as he does, are precisely the qualities that we require of the new president of DNB.

Henceforth my sincere advice and conclusion: van Dijkhuizen is the best man for the job!