ING bailout: Commission lodges appeal and opens investigation
By Sophie Mosca | Monday 14 May 2012
ING Bank and the European Commission are still locking horns over state aid granted by the Netherlands during the financial crisis. The EU executive has taken note of the EU General Court’s judgement of 2 March (see
Europolitics 4377) annulling its 2009 decision, which found that ING had been given an undue advantage as a result of changes made to terms for repayment of a capital injection. On 11 May, the Commission adopted a new more substantiated position. However, it lodged an appeal before the EU Court of Justice challenging the General Court’s ruling on points of law and opened an in-depth investigation on the changes made to the restructuring plan imposed on the Dutch banking group.
“After the judgement a rapid decision declaring the crisis aid compatible was required in order to provide legal clarity. As I still consider the plan proportionate to the restructuring requirements, there was no need to change much of the original decision beyond the relatively minor issue on which the court criticised our reasoning,” said Commission Vice-President in charge of competition policy, Joaquín Almunia.
In autumn 2008, the Dutch public authorities granted ING €10 billion in recapitalisation aid, followed, in March 2009, by an impaired asset measure, which contained a state aid element of €5 billion. ING also received public guarantees on debts worth more than €12 billion. In October 2009, the conditions for repayment of the recapitalisation aid were revised to enable ING to repay early on more favourable terms. The Commission found that this measure constituted lost earnings for the Netherlands and consequently represented additional aid of €2 billion to ING. It therefore imposed a more drastic restructuring plan on the bank, which included the split-up of its insurance and investment activities and the sale of its online banking business in the United States, ING Direct, to reduce its balance sheet to 45%. This is the measure that is disputed before the EU court.
With the new decision, the aid is deemed compatible “subject to the restructuring plan submitted at the time,” reads a statement by the EU executive. This is where the problem lies because the bank finds this plan too strict and wishes to be relieved of certain constraints.
While the disposal of the insurance activities that must be completed by the end of 2013 seems to be progressing well, the sale of ING’s subsidiary Westland Utrecht will be more complicated due to the difficult economic context. The Netherlands and the bank have therefore requested renegotiation of the plan.
“Since the original decision, the plan has revealed some implementation problems that must be assessed in an additional thorough analysis,” commented the commissioner.
The impact on competition of the impossibility of selling Westland Utrecht will therefore be examined in detail in this investigation, along with the fact that ING did not pay “sufficient remuneration” for three years to the Dutch public authorities on the €10 billion capital injection it received, despite declaring profits. The Commission will therefore examine ways of sufficiently remunerating the state to address competition distortions.
The Commission’s last source of concern is a complaint against the bank alleging that it used public aid to develop ING Direct’s activities in Italy to the detriment of its competitors. The executive intends to review ING Direct’s pricing policies and its sustainability in the absence of aid.
“ING looks forward to launching a constructive dialogue with the Dutch state and the Commission to address the issues raised,” reads a statement by the bank.