ING and Dutch state appeal EU bail-out measures

The Dutch state and financial services group ING are appealing a European Commission calculation of the company's state aid, they announced in separate statements on Thursday.

Two cases will be brought before the General Court of the European Union in Luxembourg with the intention of letting ING keep some of its subsidiaries and smoothing the further repayment of bail-out money from the Dutch finance ministry.

In November, European anti-trust commissioner Neelie Kroes forced ING to restructure after receiving 10 billion euros in state aid from the Netherlands' government. The bank and insurer had then already repaid half of this capital injection (5 billion euros plus 606 million in interest) under a year from receiving it. Kroes calculated this meant the 'real' state aid amounted to 12 billion euros. Had ING not been allowed to repay this so soon, the total interest would have been that much higher, was the competition commissioner's reasoning.

The result of Kroes' math meant ING exceeded the limit set for state aid in Brussels and allowed her more leeway to intervene in the company. ING had previously said it felt "unfairly" treated by Kroes and is now the second bank to fight a decision made by the European Commission during the credit crisis.

In response to the claim, a spokesperson for Kroes said "it is in their right to go to the court". But the Commission is "completely confident their decision is 100 percent watertight from a legal point of view".

ING was the first Dutch financial institution to receive a capital injection in October 2008, later followed by SNS Reaal and Aegon. In its agreement, the finance ministry had put in a 50 percent penalty clause if ING was to repay its 10 billion euro loan before its due date. However, those conditions were later adjusted after SNS and Aegon had negotiated more favourable terms.

A spokesperson for the finance ministry said it is unclear how Kroes came to her calculation of the additional 2 billion euros. The ministry disputes the bail-out adjustment let to additional aid and wants the procedure to be speeded up. It hopes to close the appeals case within nine months rather than 2.5 to 3 years, which a normal procedure can take. This way a verdict can be reached before the second term of the repayment is reached.

ING, SNS and Aegon are all negotiating with the Dutch state about the conditions of their repayments. Finance minister Wouter Bos would see them repay their dues sooner rather than later, because he doesn't want tax payers burdened by the risks any longer than necessary.

ING is also disputing specific elements made by Kroes for ING’s restructuring plan. Kroes has dictated the company can no longer be the market leader in savings interest rates, mortgages and loans to small and mid-cap companies. The company is against "the disproportionality of the price leadership restrictions", saying this disrupts the level playing field in the European financial sector.

ING is not coming back on its decision to separate its banking and insurance divisions; a voluntary move that was made under pressure of Kroes' scrutiny.

ING was forced to carve out 45 percent of its balance sheet (worth 1,300 billion euros). It nearly met that demand by splitting the company into an bank and an insurance firm, letting go of the latter.

By fighting the conditions ING hopes to keep its American internet savings bank ING Direct USA and the entirety of its Dutch banking operations. Kroes had demanded the American branch be hived off, and part of the national portfolio be sold to a different bank.

Governments around the globe have helped keep their financial institutions afloat after the collapse of US investment bank Lehman Brothers. In Europe, they met with the restrictions imposed by the European Commissioner for Competition. Any measure that is disrupting the internal market can be met with fines or restrictions by Neelie Kroes.