Banks May Pay More Than $1 Billion to Settle Dutch Swap Case

  • ABN, ING increase provisions after accepting reparations plan
  • Rabobank objects to plan, Deutsche Bank still considering

Four banks including ING Groep NV and ABN Amro Group NV agreed to pay hundreds of millions of euros to settle a long-running dispute with Dutch businesses over interest-rate swaps that backfired after the 2008 financial crisis.

Two other lenders -- Rabobank Groep and Deutsche Bank AG -- have said they’re still considering whether to accept the reparations plan announced Tuesday by a government-commissioned panel appointed in March to investigate the case.

ABN Amro said it will increase provisions by 360 million euros ($401 million) to compensate about 6,800 clients. ING said it expects to set aside an additional 150 million euros in the second quarter. ABN Amro was trading 0.7 percent higher in Amsterdam at 11:17 a.m., while ING was down 1.5 percent.

If all six banks agree to the plan, the damages would amount to more than 1 billion euros, Rutger Schimmelpenninck, a member of the investigating committee, said at a press conference in Amsterdam.

The agreement "removes an overhang,” for the lenders, Albert Ploeg, a banking analyst at ING, said in a note to clients on Tuesday. It also ends a headache for the government, which owns 77 percent of ABN Amro and all of SNS Bank NV, another of the four lenders.

Companies Burned

The six lenders sold almost 18,000 interest rate swaps to small and mid-sized Dutch businesses between 2005 and 2010. These derivatives, designed to protect the companies against a rise in interest rates, caused financial hardship for many when the climate changed after the crisis. The companies accused the banks of failing to fully inform them about how the products worked and the risks they faced.

The four lenders, which also include Van Lanschot NV, will pay damages in cases where the swaps weren’t suited for the company, where there was a mismatch between the swap and the underlying loan and if there was a sudden rise in payment on the contract. Further, the banks will pay individual reparations of as much as 100,000 euros for any extra interest companies had to pay, the committee said.

Rabobank disagrees with some aspects of the plan, including the manner of calculating damages, a spokesman for the bank, Hendrik Jan Eijpe, said by telephone. The lender sold the swaps to about 8,000 clients.

Dutch Finance Minister Jeroen Dijsselbloem urged Rabobank and Deutsche Bank to commit to the plan as soon as possible. "As far as I’m concerned, the interest rate derivatives dossier is concluded,” he said in a letter to parliament on Tuesday.

Van Lanschot said it will take an 11 million-euro provision for the issue. SNS Bank will announce the size of its provision when it reports in August.

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