ING Groep NV (INGA)’s rescue by the Dutch government will be re-examined by European Union competition regulators after a court overturned some of the EU’s conditions for approval of the aid.
The European Commission yesterday challenged a March ruling by the EU’s General Court that partly annulled the agency’s earlier decision to authorize ING’s bailout. The commission also gave temporary approval to the ING rescue based on the bank and insurer’s original 2009 plan, while opening a probe to examine whether ING could replace a commitment to sell WestlandUtrecht Bank by 2013.
“Since the original decision the plan has revealed some implementation problems that must be assessed in an additional thorough analysis,” said Joaquin Almunia, the EU’s antitrust chief. “I am confident that they can be settled together with the Dutch authorities.”
ING, the biggest Dutch financial-services company, was ordered by the commission to sell units to shrink its balance sheet by 45 percent by the end of 2013 and avoid undercutting rivals on prices for some banking products for three years or until it repaid the aid of 10 billion euros ($13 billion) granted in 2008. The lender returned 5 billion euros of aid in 2009 after agreeing with the Netherlands on revised terms. The EU regulator earlier determined that change amounted to extra aid of about 2 billion euros.
ING will “carefully assess” the EU’s decisions “as well as their consequences,” said Raymond Vermeulen, a spokesman for ING.
“We have recently informed the European Commission that we’ll submit an amended and updated restructuring plan and we look forward to a constructive dialogue” with the Dutch government and EU regulators “to resolve the outstanding issues,” Vermeulen said.
Ben Feiertag, a spokesman for The Hague-based Dutch finance ministry, said the government will study the details of the EU’s decisions. The Netherlands “will engage in a constructive dialogue” with the EU on the bank’s restructuring, he said.
The new investigation will also cover ING’s pricing behavior in Italy to check if ING was able to undercut rivals as a result of Dutch government help, the commission said.
The Brussels-based authority will also check the bank’s repayment terms for its state recapitalization. This stems from an agreement that the Dutch government would renotify the aid if ING didn’t pay coupons to the state for two years.
ING didn’t pay the coupons in 2010 and 2011 “thereby triggering the renotification,” the commission said yesterday.
Almunia expects ING will agree on compensation for not paying coupons even as it reported profits, Dutch newspaper Het Financieele Dagblad reported today, citing an interview.
The EU’s appeal to the European Court of Justice, the region’s highest court, will argue that regulators didn’t have to check whether a government granting aid to a bank would make the same decisions as a private investor. A market investor “would not have subscribed to the capital of ING under the conditions accepted by the state in the first place,” it said. Regulators also complained that the ruling went too far by annulling the entire decision based on this point.
EU governments spent 1.6 trillion euros to shore up banks from 2008 to 2010 amid the financial crisis that followed the collapse of Lehman Brothers Holdings Inc., according to the commission, most of that in loan guarantees and fresh capital. The EU must approve large state subsidies and can impose conditions on the aid.
ING agreed to sell its entire insurance operations, its U.S. online-banking division and Dutch mortgage lender WestlandUtrecht Bank before a 2013 deadline.
ING has indicated the sale of WestlandUtrecht Bank, which relies on its parent for its financing, is difficult under new capital requirements imposed upon banks.
ING’s Chief Executive Officer Jan Hommen told analysts in February that it wasn’t possible to sell the unit and the bank had suggested alternatives to the EU. He didn’t specify what those were.
The EU will study ING’s suggestions, including an integration of WestlandUtrecht Bank in its Dutch Nationale-Nederlanden insurance unit, Het Financieele Dagblad reported, citing Almunia.
WestlandUtrecht Bank accounts for about 20 percent to 25 percent of ING’s 142 billion euros of Dutch mortgages outstanding. ING is the second-biggest Dutch mortgage lender.
In February, ING completed the sale of its U.S. online bank to Capital One for $9 billion. The company also disposed of its Latin American insurance operations last year.
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