Abstract

The poster provides insights into the type of economic activity of the owning groups of the Captive Financial Institutions and Money Lenders sector (S.127) in The Netherlands. Captive Financial Institutions, hereafter referred to as Captive Financial Institutions or S.127, are subsidiaries of foreign companies with the main purpose of providing financial intermediation with other companies within the group.

The Netherlands is internationally known as a country with a large presence of Captive Financial Institutions. Total assets of S.127 amounted to more than EUR 4000 billion in 2021, more than four times GDP. The large presence is also illustrated by the leading position in foreign direct investment: until 2018, according to figures from the IMF (2021), the Netherlands had the most inward foreign direct investment in the world. Since then, the Netherlands has been the second country in terms of inward foreign direct investment in the world, behind the United States. More than 65 percent of this inward foreign direct investment occurs through S.127. Most of these entities have none or minor operational activities in the Netherlands; therefore, these entities are also known as conduit companies, with limited relation to the real economy. For this reason, it is particularly interesting to examine which type of international companies are active in The Netherlands through their establishment of Captive Financial Institutions.

Our research shows the main economic activity of the owning groups of these entities. For our method, we use the total assets of S.127 entities as our key metric. We then break down the evolution of total assets by type of economic activity, to analyze the presence of certain industries in The Netherlands. Similar to research conducted by Di Filippo & Pierret (2020) of the Central Bank of Luxembourg, we follow the International Standard Industrial Classification of All Economic Activities (ISIC) of the United Nations to classify the owning groups of S.127 entities by their main economic activity. We utilize balance sheet data of the largest S.127 entities in The Netherlands. Data is obtained from a subset of our population sample of S.127 entities that reported to De Nederlandsche Bank (DNB) over the last decade and up to 2021. Our preliminary results suggest that there is a significant presence of pharmaceutical groups in The Netherlands, as well as groups that operate in the information technology and raw minerals sectors. Our results will also demonstrate how the presence of these type of companies has changed over time and when which type of companies became or stopped to be active in The Netherlands.