The Dutch government made “large errors” in its bailouts of Fortis, ABN Amro Holding NV and ING Groep NV in 2008 and 2009, pushing up risks and costs for the country’s taxpayers, a parliamentary committee said today.
“The risks the state took upon itself were large and not transparent,” lawmaker Jan de Wit, who headed an investigation into the measures taken by the Dutch authorities, said about the rescue of Fortis’s Dutch units in a statement today. “Execution of the rescue plans was lacking. Valuations used were incomplete and inaccurate.” Information exchange between the Finance Ministry, its adviser Lazard Ltd. and the Dutch central bank was also “insufficient,” he said.
De Wit submitted his report in The Hague today after confidentially interrogating 71 people under oath. The government bought Fortis’s Dutch banking and insurance units and its stake in ABN Amro for 16.8 billion euros ($22 billion) in October 2008 to shore up the financial system as the company ran out of short-term funding, customers withdrew deposits and investors lost confidence. Subsequent aid almost doubled the costs of the bailout to about 30 billion euros.
De Wit said Fortis’ problems were mostly related to its joint 72 billion-euro takeover of ABN Amro in a consortium with Royal Bank of Scotland Group Plc and Banco Santander SA in 2007. The Dutch central bank and the ministry of finance shouldn’t have approved that deal, he said. RBS was later bailed out by the U.K. in the wake of that takeover.
ABN Amro’s banking businesses were later merged and separated from the insurance unit, now called ASR Nederland NV. ABN Amro Group NV, as the nationalized bank is now called, is carefully reading the report, spokesman Arien Bikker said.
The committee also criticized the bailout of ING, the country’s biggest financial-services company. The bank and insurer received 10 billion euros in aid in October 2008, and then transferred the risk on 21.6 billion euros of U.S. mortgage assets to the Dutch government in January 2009.
“The reserved attitude of the ministry of finance toward accepting a direct solution of the U.S. mortgage portfolio led to a non-optimal outcome for both the state and ING, with far-reaching consequences for ING and higher risk for the taxpayer than needed,” De Wit said.
ING “will further review and assess the report of the committee, taking into account the international context and the interests of all stakeholders,” the company said in a statement on its website. “ING has taken decisive actions to reduce the size and complexity of the company and has implemented numerous changes to strengthen its financial position, risk management, governance model and remuneration structure.”
The European Union ordered ING to divest its insurance operations, its U.S. online bank and Dutch mortgage lender WestlandUtrecht Bank before the end of 2013 as a condition for approving its bailout. The firm still has to repay the Netherlands 3 billion euros of aid.
In its first study in May 2010 into the causes of the financial crisis, the parliamentary committee found the Dutch central bank failed to act on warning signs. Today’s report came after a formal inquiry, whose hearings under oath make it the parliament’s strongest investigative tool.
Public hearings were held with 46 people, including current ING CEO Jan Hommen and former central bank President Nout Wellink and ex-finance minister Wouter Bos.
The Dutch central bank in a statement today that decisions at the time were taken during “an unprecedented hectic period in which the stability of the Dutch financial system was at stake.”
Finance Minister Jan Kees de Jager in 2010 demanded changes at the central bank after De Wit found supervision of DSB Bank NV and Landsbanki Islands hf’s Dutch Icesave unit, which both collapsed, had been insufficient.
De Jager last year decided central bank presidents can no longer serve a third term, effectively ending the reign of president Nout Wellink. The Amsterdam-based regulator will study the report and see whether additional measures are needed on top of planned reforms. The finance ministry will comment on the report later today.
“It’s now parliament’s role to study accountability and to establish what should happen in terms of consequences,” De Wit said at a press conference today.
De Wit’s study included a list of recommendations, including setting up a European supervisor and so-called ring-fencing of banks’ operations outside Europe.