The Dutch government will reinforce the core capital of Dutch banking and insurance group ING by injecting 10 billion euros (13.4 billion US dollars), the Dutch Finance Ministry said Sunday.
The head office of Dutch financial group ING is seen in Amsterdam, October 19, 2008. (Xinhua/Reuters Photo)
The government gets securities in return, which have largely the same features as shares but a higher dividend than common shares. These securities qualify as core capital -- Core Tier 1 as approved by the Dutch central bank, the ministry said in a news release on its website.
The government will also nominate two members for the ING's supervisory board, who have veto right on certain decisions.
The capital injection will come from the 20-billion-euro (26.8-billion-dollar) fund that the Dutch government created earlier this month to protect "sound and viable" financial institutions from external shocks.
"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," the ministry said.
All members of the ING's executive board shall relinquish their bonuses for this year, whether in cash, in options or shares. Redundancy packages shall be restricted to one year's fixed annual pay, it said.
The costs incurred by the government in carrying out this capital provision shall be borne entirely by the financial services group.
The rate of return on the securities is 8.5 percent 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 percent, the return rate shall be increased to more than the dividends.
After the government injection, there is to be no dilution of the share capital held by current shareholders, the ministry said.
The government-nominated supervisory board members can veto fundamental decisions relating to substantial acquisitions and investments involving more than 25 percent of own funds; or increases or reductions in outstanding capital; and proposals to shareholders to change remuneration schemes.
ING may buy back the securities in cash at 150 percent of the issue price or converting them to ordinary shares after three years. The latter is subject to approval by the general meeting of shareholders.
The price of the securities, 10 euros (13.4 dollars), is based on ING's closing share price on Thursday, before the share price plunged on Friday, the Finance Ministry said.
ING announced on Friday a net loss of 500 million euros in the third quarter in the face of financial market upheaval and asset depreciation. The group's share price plummeted 27 percent to 7.34euros (9.84 dollars) on that day. Source: Xinhua