The Dutch government will reinforce the core capital of Dutch banking and insurance group ING by 10 billion euros (13.4 billion U.S. dollars), the Dutch Finance Ministry said Sunday.
The government gets securities with special rights in return, which have 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 ING's supervisory board, who have veto rights on fundamental decisions relating to substantial acquisitions and investments, and proposals to shareholders to change remuneration schemes.
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 ministrysaid.
Under the deal, all members of 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.
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.
ING may buy back the securities in cash at 150 percent of the issue price or convert them to ordinary shares after three years.
The price of the securities, 10 euros (13.4 dollars), is based on ING's closing share price Thursday, before the share price plunged Friday, the Finance Ministry said.
ING, which is said to be among the top 20 financial services companies globally, announced Friday a net loss of 500 million euros (670 million dollars) in the third quarter in the face of financial market upheaval and asset depreciation. The group's share price plummeted 27 percent to 7.34 euros (9.84 dollars) that day.