Rabobank Takes $555 Million Provision to Settle Dutch Swaps

  • Lender had taken earlier charge of 200 million euros
  • Deutsche Bank considering whether to join compensation plan

Rabobank Groep agreed to settle a long-running dispute with Dutch businesses over interest-rate swaps that backfired after the 2008 financial crisis.

The closely held lender will increase provisions by 500 million euros ($555 million) for compensating about 9,000 clients that had bought about 11,000 swaps, the Utrecht-based lender said in a statement on Thursday. Rabobank had already made provisions of 200 million euros over the issue in 2015 according to bank spokesman, Hendrik Jan Eijpe.

Six lenders sold almost 18,000 interest-rate swaps to small- and medium-sized Dutch businesses between 2005 and 2010. The derivatives, designed to protect against interest-rate increases, 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.

ING Groep NV and ABN Amro Group NV, SNS Bank NV and Van Lanschot NV, said on Tuesday that they had accepted a reparations plan by a government-commissioned panel appointed in March to investigate the case. Deutsche Bank AG has told the panel its still considering its response to the proposal.

‘Rapid Solution’

“Rabobank shows it wants to contribute to a rapid solution for its customers,” Chairman Wiebe Draijer said in the statement. “Interest-rate derivatives satisfy a need to hedge interest rate risk. Yet this has not always gone well in the past.”

The lenders 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.

ABN Amro said it will increase provisions by 360 million euros to compensate about 6,800 clients. ING said it expects to set aside an additional 150 million euros in the second quarter. 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.

Rabobank didn’t immediately accept the reparations plan on Tuesday and said it disagreed with some aspects, including the manner of calculating damages.

Dutch Finance Minister Jeroen Dijsselbloem had urged Rabobank and Deutsche Bank to commit to the plan as soon as possible. “I’m pleased that Rabobank came to this decision,” he told reporters in The Hague. “It’s a major step forward for the sector. Let’s look ahead now.”

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