Dutch Lenders Get Respite for Safety Fund to Ease Bank Levy

Dutch banks, including ING Groep NV and Rabobank Groep, gained a year of respite from contributing to a fund that reimburses depositors when a lender fails after the government proposed a bank levy.

The additional time will “mitigate the cumulative effect for the banks somewhat” Dutch Finance state secretary Frans Weekers said in a letter sent to parliament today. Banks will start paying for it in July 2013, Weekers said.

The Dutch caretaker government said in April it would introduce a separate 600 million-euro ($751 million) bank tax in the middle of this year as part of an emergency austerity deal reached with opposition parties. That was was double the level of an earlier proposal, designed to require lenders to take on some of the costs of ensuring financial stability.

In a worst-case outlook total outstanding bank credit could be cut by 20 billion euros a year and house prices could drop by 19 percent over 10 years, the country’s central bank said in a letter to Weekers published today. The levy is “incompatible with maintaining household and commercial credit at desirable levels,” it said.

The Dutch government in March submitted draft legislation to make each lender pay a percentage of deposits into a fund annually. The fund should reach 1 percent of banks’ total deposits within 15 years. At the end of September 2009 about 390 billion euros in savings were covered by the current deposit guarantee plan.

Under the current system no such depositor fund exists, though deposits of as much as 100,000 euros are guaranteed. Dutch banks such as Rabobank and ING paid hundreds of millions of euros to compensate clients of DSB Bank NV after the regional lender collapsed in October 2009.

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