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Concerns about new financing rules
The new financing rules, which will be rolled out slowly by 2023, are causing concern among members of parliament and lenders. Member of parliament Jaco Geurts (CDA) stated last week, for example, that the new standards for banks could make the transition to circular agriculture impossible.
The new financing rules are based on the Basal 4 standard. This standard states that the value of the collateral (such as land and buildings) will play a lesser role in determining your credit risk than in the past. In short: the bank has to hold more capital for your credit, so that the costs increase and the interest costs rise. "The cash flow has always been leading, but the value of a company's collateral provided comfort for the bank. As a result, capital costs at companies with a lot of collateral became lower," says Pierre Berntsen, director of Agrarian Affairs at ABN Amro.
Uncertainties rear their head
According to MP Geurts, this poses problems for the many ambitions in agriculture. According to him, good financing options are one of the building blocks for these plans. "If there is not an answer to this problem quickly, then everything that is invented in the House will not be accomplished." Agriculture Minister Carola Schouten is aware of the problems that Geurts outlines. "I'm also afraid that there are companies that will sell something of value (such as land) to get cash," she said. "That is why I am already discussing this with Minister Wopke Hoeksta and the banks."
The latter group, united in the Dutch Banking Association, already sent a letter to the House of Representatives this summer in which they write that the Basel 4 standard increases the costs of financing. "The standard means that banks have to hold more risk capital and that leads to higher rates," Berntsen reports. "Dairy and arable farms in particular will notice this, because they often have a lot of collateral. The costs for the banks are higher in this way and that in turn has consequences for the provision of credit. This is disadvantageous for farmers, which is why we have this signal issued."
Entrepreneurs with a lot of land are twice the victims
Entrepreneurs with a lot of certainties such as land and buildings are, as outlined, extra victims of this new policy. This is because profitability and liquidity become even more important than the value of the above assets. "This is mainly because of European policy. The Netherlands has the most expensive land in the European Union. We attach enormous value to land and approach it as low risk. The European approach does not do that and rates it as higher. credit risk", explains Peter Pals, director of Farmers Funding & Advies.
"This also means that it is still unclear how much the national government can change about this project. After all, it is a European process," concludes Berntsen. In contrast, the project will only start in 2023 and should be fully active in 2027. "Smaller adjustments are still made regularly, but the consequences are certainly visible." In what form remains to be seen.
Kimberly Baker
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