MercoPress. South Atlantic News Agency

Dutch government with 13.4 billion USD stake in ING bank

The government of the Netherlands has said it will invest 13.4 billion US dollars in banking and insurance company ING Groep NV to boost its capital position.

Wouter Bos, the Dutch finance minister, said that the government would buy one million newly-issued non-voting shares in the "healthy" institution, one of the world's 20 biggest banks. "It is a large sum that we are injecting into a healthy business," he said at a news conference on Sunday. The accord between ING, the finance ministry and the Netherlands central bank came after ING on Friday announced that it expected a 670 million US dollars net loss in the third quarter because of the financial crisis and asset depreciation. The quarterly loss, its first in 50 years, would be caused 2.68 billion in investment losses, asset write-downs and extra provisions for bad loans, it said. The company's share price on the Amsterdam stock exchange fell 24% amid rumours that it was short of capital. Bos said that the investment was temporary, but the state will name two members of ING's supervisory board. "The Dutch government realises that it is an unusual intervention into the banking system," he said. But Bos added that the government "would exclude no measures that would protect savers". The shares will earn at least 8.5% interest once ING begins paying dividends again, and that amount will escalate each year. But ING can repurchase the shares for 20.14 US dollars. Bos said that would give the company a strong incentive to buy them back and see the state exit "as soon as this financial hurricane recedes". The Dutch government has already put about 22.5 billion into the joint rescue of Fortis bank with the Belgian and Luxembourg governments. The move is the latest in a series of rescue plans and bailouts by governments around the world aimed at stemming the impact of the global financial crisis. ING has more than 85 million customers worldwide, according to its website and some 338 billion Euros in saving and current account deposits. Earlier on Sunday, South Korea said that it would guarantee up to 100 billion of banks' foreign exchange traffic in order to secure markets. Seoul said, in a joint statement with its central bank, that it would also provide 30 billion US dollars liquidity to domestic banks and exporters, and help smaller banks get loans, from foreign exchange reserves. Meanwhile the chairman, director-general and head of risk and finance at troubled French bank Caisse d'Epargne quit the institution's board after an emergency meeting in Paris. The French savings bank lost 800 million in high-risk derivatives trading, a move which Nicolas Sarkozy, the French president, described as "unacceptable" at a time when European governments were scrambling to shore up confidence in banking. Charles Milhaud, the chairman, told Le Journal du Dimanche newspaper that he felt responsible for the scandal. "Believe me, this incident is serious and is profoundly upsetting for me," he said.