EC Approves Recapitalization Package For ABN Amro

Published: 09-Feb-2010

The European Commission (EC) has temporarily approved a recapitalization package of EUR6.9bn in favor of ABN Amro and Fortis Bank Nederland until July 31, 2010, under EU state aid rules.

The additional recapitalization package is necessary to finance the separation of ABN Amro from its mother company and the integration costs resulting from the merger between FBN and ABN Amro.

EC has also extended the scope of its in-depth investigation, opened in April 2009 into an aid package related to the purchase of Fortis Bank Nederland by the Dutch state, to include these additional measures. This will allow it to assess in detail the combined effect of all the support measures in favor of Fortis Bank Nederland and ABN Amro and give interested parties an opportunity to comment on the additional measures.

Neelie Kroes, commissioner of EC, said: "This recapitalization package is a further step towards the restructuring of Fortis Bank Nederland and ABN Amro. I sincerely hope that ABN Amro and Fortis will rapidly finalise their integration plans and resume their role as lender to the real economy in The Netherlands. The commission will in the meantime make sure that competition is preserved."

The purchase by the Dutch State of Fortis Bank Nederland (FBN) on 3 October 2008 in the context of the rescue of Fortis, gave the Dutch State also control over the Dutch assets of ABN Amro, which Fortis had acquired in 2007. However, these assets had not yet been separated from the rest of ABN Amro until the first week of February 2010.

The Dutch State recently announced a recapitalization package of EUR6.89bn aimed at financing the separation costs of ABN and FBN, the costs of their integration and the settlement of certain obligations towards the other members of the ABN Amro buyers consortium.

State support would be provided through a set of five measures including a guarantee on a EUR34.5bn portfolio of Dutch mortgage loans, the subscription to a mandatory convertible security worth EUR3.1m, the conversion into capital of Tier 2 loans granted to FBN, a cash payment of EUR740m and the provision of a counter guarantee on a EUR950m liability.

EC's preliminary assessment found that the measures seem necessary to allow the separation of the Dutch assets of ABN Amro, which the Dutch State is obliged to carry out and to finance since it took the place of Fortis in the consortium shareholders agreement signed between Fortis, Santander and RBS when deciding to acquire ABN Amro in 2007.

Given their low level of capital post separation, FBN and ABN are unable to finance by their own means the merger, decided by Fortis in 2007 and confirmed by the Dutch State in November 2008 following its acquisition of the banks. EC therefore authorised these measures until 31/07/2010 as urgent rescue aid, to allow the implementation of the ABN Amro asset separation and of the subsequent merger with FBN.

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