State of the Netherlands nationalises SNS REAAL

News item | 01-02-2013 | 09:05

Financial stability safeguarded, private sector to contribute

Nationalisation under the Invervention Act (Interventiewet) has become necessary because SNS REAAL finds itself in acute distress on account of its real estate problems. DNB had asked the institution to produce a solution before the firm deadline of 31 January 2013, 18:00 hours. The absence of such a solution, would mean bankruptcy for SNS Bank and put the Dutch financial system in serious and immediate danger. After DNB concluded once the deadline had passed that no solution was found, nationalisation was the only remaining option to safeguard financial stability in the Netherlands. "I scrutinized all alternative solutions involving market parties. But yesterday night I found myself compelled to conclude that no acceptable total solution was offered. I therefore had to use the instrument of last resort, which is nationalisation. Nationalisation would safeguard financial stability and prevent serious damage to the economy. I can well understand the aversion many people will feel because once again, a large sum of taxpayers' money is required. This is why I want the private sector to contribute as much as possible towards the rescue of SNS Reaal," Minister of Finance Jeroen Dijsselbloem said.

The private sector will have to share in the cost to the maximum extent that DNB regards as justifiable. This means that shareholders and subordinated creditors will be expropriated, saving the State €1 billion in expenses. Added to this, a special, one-off resolution levy of another €1 billion is to be imposed on the banks in 2014.

The intervention and the budgetary consequences

DNB has found that supplementary financial measures will be required to stabilise SNS REAAL. SNS REAAL's problematic real estate arm is to be isolated. The entire operation will cost the State €3.7 billion. This amount breaks down into €2.2 billion in new capital injections, €0.8 billion to be written off from the earlier aid package, and €0.7 billion to put the real estate portfolio at arm's length.

Furthermore, the State will extend €1.1 billion in loans plus guarantees worth €5 billion. As a result, the EMU balance 2013 of the Netherlands will deteriorate by 0.6% while EMU debt will increase by 1.6%.

Savings are safe

Savers and other clients of SNS REAAL will notice no other changes. The client services of SNS REAAL with 1,6 million saving accounts and million checking accounts will continue as usual and their savings are secure.

Pay moderation

The CEO and CFO of SNS Reaal, Mr Latenstein and Mr Lamp, have announced their resignation as directors of SNS Reaal. The new Board will consist of Mr Van Olphen and Mr Oostendorp. The Chair of the Supervisory Board has also resigned. He is to be succeeded by the current vice-chairman, Mr Overmars. No bonuses have been or will be paid to directors. In addition to the ban on bonuses, moreover, the institution is expected to moderate remuneration to employees.

The future of SNS Reaal

The new management has received instructions to ensure that once SNS REAAL has been stabilised and market conditions allow it, business units are returned into private hands.

Avoiding government intervention

This fresh intervention marks a setback in the effort to restore the Dutch financial sector to robust health. The Minister intends to avoid such costly governemnt measures in the future. Minister Dijsselbloem: "In the future, banks must be far easier to seperate. This will mean that instead of an entire institution, only the parts of public relevance will have to be rescued. Legislation at the European level will have to ensure that in the future to the extent possible, the bill will be paid by private stakeholders.”

Technical aspects

The expropriation decision and its press release may be read on the website.

In 2014, a one-off levy of €1 billion will be imposed on the banks, to be paid into the treasury. This levy will not qualify for deduction from corporate tax. The contribution of each bank will be proportionate to its share in the total amount of deposits guaranteed under the Deposit Guarantee Scheme as at 1 February 2013.