ING Groep NV (INGA) won a court ruling forcing European Union regulators to re-examine the conditions they imposed on the Dutch lender’s government rescue in the wake of the 2008 financial crisis.
The EU’s General Court said the European Commission wrongly considered a revision of repayment terms as 2 billion euros ($2.65 billion) of additional aid to ING on top of 10 billion euros it received in 2008. The court struck down part of the EU’s decision, which will force regulators to re-open their assessment of part of the Dutch government’s bailout to the bank.
ING was ordered by the commission to sell units to shrink its balance sheet by 45 percent by the end of 2013 and avoid undercutting rivals on prices for some banking products for three years or until it repaid the aid. The lender returned 5 billion euros of aid in 2009 after agreeing with the Netherlands on revised terms. The EU regulator determined that change amounted to extra aid of about 2 billion euros.
“This is quite good news for ING,” said Cor Kluis, an analyst at Rabobank International in Utrecht. “Hopefully it won’t take too much time for the EC to adjust the terms. We also hope the EC won’t appeal.”
ING shares rose 3.2 percent to 6.99 euros in Amsterdam trading today. That made it the second-best performer in the 32- company Stoxx Insurance 600 Index, which rose 0.5 percent.
EU governments spent 1.6 trillion euros to shore up banks from 2008 to 2010 amid the financial crisis that followed the collapse of Lehman Brothers Holdings Inc., according to the commission, most of that in loan guarantees and fresh capital. The EU must approve large state subsidies and can impose conditions on the aid.
The ruling “should mean that the commission has to reopen the formal investigation procedure” on ING’s restructuring, said Christoph Arhold, a lawyer for White & Case LLP based in Berlin and Brussels. “The whole approval has gone, so the commitments have to be renegotiated.”
ING and the Dutch government challenged the terms of the EU’s approval, which the bank says punished it too harshly for state help in 2008 and 2009. ING said the regulator miscalculated the amount of aid and imposed excessive restructuring demands.
Changed Bailout Terms
The commission didn’t show that changes to the bailout deal agreed to by ING and the Dutch government were on terms that a private investor would have refused to give the bank, the court said.
That rejects the regulator’s argument that it doesn’t need to check if private investors would accept the same terms offered by the state in cases where a company has already received government help, Arhold said.
“ING welcomes the judgment to partially annul the EC decision,” the Amsterdam-based bank said in a statement. “ING will carefully assess the full judgment and its consequences. Announcements on any potential further actions will only be made if and when appropriate.”
The commission will publish a revised decision on the aid, Antoine Colombani, spokesman for Joaquin Almunia, the EU’s antitrust commissioner, said in an e-mail. The regulator will “carefully assess” the ruling before deciding whether to appeal, he said.
Finance Ministry ‘Satisfied’
The Dutch Finance Ministry in The Hague is “satisfied” by the ruling and will study it to “further assess the consequences,” spokesman Ben Feiertag, said in a phone interview.
ING was ordered to sell its entire insurance operations, its U.S. online-banking division and Dutch mortgage lender WestlandUtrecht Bank before a 2013 deadline.
Pending the court ruling, Chief Executive Officer Jan Hommen pushed ahead with the forced restructuring.
Last month, ING completed the sale of its U.S. online bank to Capital One for $9 billion. The company also disposed of its Latin American insurance operations last year. The divestment program encountered a glitch as Europe’s fiscal woes scared off potential buyers, making initial public offerings impossible.
“Additional flexibility with regard to the divestment deadlines for ING’s insurance activities and the divestment of WestlandUtrecht Bank will have positive implications for the stock,” said Lemer Salah, an Amsterdam-based analyst at SNS Securities, as the lender “is facing serious challenges” with those disposals.
ABN Amro, WestLB
The EU court still has to rule on state aid conditions imposed on a second Dutch bank, ABN Amro Group NV, which last year challenged the EU ban on it acquiring businesses.
WestLB AG shareholders also sought to suspend a deadline that would have stopped the lender’s real estate unit WestImmo from accepting new business. WestLB agreed last year to be wound down and broken up.
The Dutch central bank joined the case on ING’s behalf. National bank supervisors should formally be heard by the commission to avoid it imposing terms that hurt financial stability, it said. Klaas Knot, who heads the central bank, has also argued for a dispute settlement procedure when competition and national financial regulators clash.
“We see today’s ruling as a signal to the commission that it would be wise to involve national supervisors in its decisions,” said Kees Verhagen, a spokesman for the Dutch central bank in Amsterdam. “The court ruled the decision was based on incomplete information and that was partly caused by the fact that they ignored information submitted by the national supervisor.”
The cases are T-33/10, ING Groep v. Commission and T-29/10, Netherlands v. Commission.
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