The biggest Dutch financial services company and among the global top 20 financial services, Dutch bank ING is getting a €10 billion cash infusion from the Dutch government after it announced a net loss of €500 million ($670 million) in the third quarter in the face of financial market upheaval and asset depreciation.
The Dutch government is making the funds available to ING from the €20 billion ($26.8-billion) fund that it created earlier this month to protect "sound and viable" financial institutions from external shocks.
ING shares surged 24 per cent in Amsterdam on the news of the infusion.
The bank was one of the parties approached by the Financial Services Authority in the UK to take over troubled mortgage lender Bradford & Bingley prior to its nationalisation.
The infusion comes after a weekend of intense negotiations between bank executives and government and central bank officials as the group's share price plummeted 27 per cent to €7.34 ($9.84) following its announcement of a net loss of €500 million in the third quarter due to €1.6 billion in write-downs.
ING said on Friday that it had no urgent need of fresh capital, but with the fall of Fortis, investors' confidence had sagged and it would follow the global trend of bolstering its capital.
With €338 billion in savings and current-account deposits, the Dutch government sought to boost the confidence of the bank's customers and shareholders, with the Dutch central bank president, Nout Wellink saying, ''This is not about saving bad companies but to secure the future of a healthy one."
A ministry spokesman said, "With this capital reinforcement, ING, a healthy and well managed enterprise, has robust financial resilience, making it one of the stronger banks in international terms."
''Our capital position was in line with previously targeted levels and regulatory requirements,'' ING chief executive, Michel Tilmant, said in a statement. ''However, market conditions have changed dramatically in recent weeks and have led to an internationally recognised belief that going forward, in this market environment, capital requirements for financial institutions should be higher.''
The capital injection will give the Dutch government 8.5-per cent stake in the bank in the form of non-voting preferred shares that ING can buy back in cash at 150 per cent of the issue price or convert them to ordinary shares after three years.
The government will also be able to nominate two members on the supervisory board, who will have veto rights on fundamental decisions relating to substantial acquisitions and investments and under the deal, all members of ING's executive board will also have to relinquish their bonuses for this year, whether in cash, in options or shares.
Redundancy packages will be restricted to one year's fixed annual pay.
The rate of return on the securities is 8.5 per cent and it shall only be paid out if dividends are also awarded over the preceding year, the release said. Should the dividends exceed 8.5 per cent, the return rate shall be increased to more than the dividends.
The ministry said that after the government's injection, there will be no dilution of the share capital held by current shareholders.
The capital injection will raise ING's core tier 1 capital ratio to 8 per cent, well above the industry recommended 6 per cent target, and reduce the group's debt to equity ratio to 10 per cent from 15 per cent.
The group's ING Direct banking service also has deposits from the UK and it has taken liability for £2.5 billion of deposits of 160,000 UK customers in failed Icelandic bank Kaupthing Edge.
In another related development, Fubon Financial Holding, Taiwan's second largest financial services firm by market value is acquiring ING Groep NV's life-insurance unit in Taiwan for $600 million.
The two companies said in a joint statement in Taiwan today that the acquisition will give Fubon 2.2 million customers, adding to its base of 6.5 million. The transaction will close in the first quarter.