Plans A to Z fail for DSB Bank

All attempts to save the DSB Bank, which was put under central bank supervision a week ago, have failed. On Monday morning the Amsterdam court made the bankruptcy final, after it had given the consumer bank three respites to find an alternative solution.

Dirk Scheringa, the founder and owner of DSB, on Friday announced an American investor was seriously interested in buying his company. He has previously tried to persuade a consortium of Dutch banks to take over his ravaged bank after it succumbed to negative publicity surrounding its mortgages and insurance policies.

NRC Handelsblad discovered Saturday that Lone Star Funds, an investment firm from Texas, had approached DSB. The private equity firm specialises in buying distressed companies and assets, such as toxic mortgage loans. But on Sunday the company pulled out of negotiations after studying DSB's books.

A last alternative, dubbed 'plan B.', was launched Saturday evening on the TV show Nova. The plan suggested customers who stand to lose their money in a bankruptcy convert some of their savings to stocks.

Most savings are guaranteed up to 100,000 euros back under the Dutch national guarantee scheme, but people who have more than that, or who signed up for so-called subordinated deposits - where they waved their right to the guarantee in exchange for a higher interested rate - are left empty handed if the bank fails. The alternative could have meant they would secure at least part of their savings, but the plan's flaw was that it depended on a 100 million euro loan from the state.

Scheringa pleaded with finance minister Wouter Bos to support the plan, but Bos has categorically ruled out "using taxpayers’ money to bail out an unhealthy company that came into problems through its own wrongdoings".

The Dutch government nationalised ABN Amro and Fortis Bank Nederland in the midst of the credit crisis and injected millions into financial services company ING last year. DSB Bank seemed to sail through the credit crisis without substantial trouble. But instead it suffered from a backlash from products it had sold to customers for decades.

Scheringa built his empire based on consumer credit and mortgages, which he often sold to people who were not eligible under the rules set by the central bank. DSB and its subsidiary companies told customers they could have the loans if they also bought insurance policies from the bank. DSB earned commissions of up to 80 percent on the insurance policies.

On October 1, the chairman of a foundation for people who felt duped by DSB, went on national television to advise customers to withdraw their savings from the bank because a bankrupt DSB would be better for all involved. 670 million euros was removed from DSB accounts in the bankrun that followed, causing the central bank to intervene on October 12.

Scheringa, a longtime enfant terrible in Dutch banking, and his 2,000 employees who demonstrated outside the Amsterdam court and appeared on various talkshows managed to tilt public opinion in his favour in the past week and he also found the judges in Amsterdam on his side. The Amsterdam court gave Scheringa three chances to avoid a complete collapse, extending the deadline on Sunday, Thursday and Friday. But on Monday it drew the final curtain.