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Netherlands nationalizes SNS Reaal

By Matt Steinglass in London
updated 6:33 AM EST, Fri February 1, 2013
Ronald Latenstein, SNS Reaal's chief executive, as well as the bank's chief financial officer resigned.
Ronald Latenstein, SNS Reaal's chief executive, as well as the bank's chief financial officer resigned.
STORY HIGHLIGHTS
  • Dutch Finance Minister Jeroen Dijsselbloem said he had "looked at every alternative
  • The state will inject €2.2bn, while forgiving €800m the bank still owed from its earlier bailout
  • The finance ministry said the bank's management would receive no bonuses

(Financial TImes) -- The Netherlands has nationalised SNS Reaal, the fourth-largest systemically important bank in the Netherlands, at a cost to Dutch taxpayers of €3.7bn.

The bank had spent the past several weeks in a desperate search for private capital to compensate for heavy losses in its real estate holdings, particularly in Spanish assets.

Jeroen Dijsselbloem, the Netherlands' finance minister, said in a statement he had "looked at every alternative involving private parties", but found none that could guarantee the stability of the Dutch banking system.

With ABN Amro still in government hands after it was nationalised in 2009, the nationalisation of SNS Reaal means two of the Netherlands' four systemically important banks are state-owned.

The nationalisation, carried out under the Netherlands' 2012 law on bank intervention, will mean shareholders of the bank and subordinated debt holders will see their stakes wiped out.

The state will inject €2.2bn in new capital, while forgiving €800m the bank still owed from its earlier bailout during the financial crisis. It will also write off €700m in the value of the bank's real estate assets.

"I can sympathise easily with the resistance many will feel because we again will need to use a large amount of public money," Mr Dijsselbloem said. "This is why I want the private sector to pay as large a share as possible of the rescue of SNS Reaal."

In addition, the government will levy a one-time tariff of €1bn on Dutch banks in 2014 as a contribution to restoring the health of the financial sector.

"Politically speaking, that's very important," said Harald Benink, a professor of finance at Tilburg University.

Ronald Latenstein, SNS Reaal's chief executive, as well as the bank's chief financial officer and chairman of the board of directors, tendered their resignations. SNS Reaal announced they "could not take responsibility for the nationalisation scenario".

The finance ministry said the bank's management would receive no bonuses, and that salary cuts were to be expected.

The nationalisation comes after the European Commission blocked an earlier plan that would have seen the country's other large banks, Rabobank, ING and ABN Amro, contribute capital to a so-called "bad bank" to house SNS Reaal's distressed property assets.

In a blogpost on FT.com on Thursday, economist Heleen Mees noted that rating agency Fitch has warned it may downgrade the debt of other Dutch and European banks if a government rescue of SNS Reaal wipes out ordinary bondholders.

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