State injects 10 billion euros into ING

ING, the largest financial services company in the Netherlands, is to receive a capital injection of 10 billion euros from the Dutch central bank. The deal makes the government a major shareholder in ING, finance minister Wouter Bos announced on Sunday evening.

Investors responded positively to the move. ING shares rose 20 percent at the start of trading in Amsterdam on Monday.

ING is the first institution to call on the 20 billion euro fund set up by the Dutch government earlier this month to help fundamentally healthy but ailing financial companies. It is the third bank in the Netherlands to be bailed out by the government. Fortis and ABN Amro were fully nationalised on October 3.

Bos and central bank president Nout Wellink stressed at a press conference on Sunday that the ING situation is completely different from the one which faced Fortis and ABN Amro.

The bank did not need to be saved as such, Bos said. It simply required a better capital position because of the changed situation on the financial markets. "We gave ING a buffer against the storm. We are putting money into an essentially healthy company," Bos said.

ING shares plunged 27 percent on Friday. After the close of trading, ING announced it expected to post a 500 million euro loss in the third quarter. Based on Friday's closing price, ING's market value is now 15.3 billion euros.

Under the terms of the deal, the government will buy 10 billion euros-worth of new non-voting shares. The state will also name two members of the supervisory board who can veto important decisions.

One condition of the deal is that managers receive no more than a year's pay if they are dismissed. ING also said it will cancel dividends for the rest of the year.