EU extends ABN Amro probe

City A.M. Reporter
EUROPEAN regulators yesterday extended an in-depth investigation into state aid granted to nationalised Dutch banks ABN Amro and Fortis Bank Nederland and temporarily approved a €6.9bn (£6bn) recapitalisation to finance their merger.

The European Commission, competition watchdog of the 27-country European Union, said it would assess the combined effect of all the aid and the recapitalisation to ensure it did not skew competition.

The Dutch government has committed a total of more than €23bn since October 2008 to the nationalisation and recapitalisation process, making it one of the world’s costliest bailouts since the financial crisis began.

The government wants to merge the two companies and eventually privatise the combined group as part of its exit strategy for the banks, which it nationalised in October 2008 for €16.8bn.

“This recapitalisation package is a further step towards the restructuring of Fortis Bank Nederland and ABN AMRO,” Competition Commissioner Neelie Kroes said.

The Competition Commissioner added: “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 recapitalisation, approved until 31 July, includes a guarantee on a €34.5bn portfolio of Dutch mortgage loans and the subscription to a mandatory convertible security of €3.1m.

It also covers the conversion into capital of Tier 2 loans granted to Fortis, a cash payment of €740m and the provision of a counter guarantee on a €950m liability.