European Competition Commissioner Neelie Kroes: Steelie Neelie takes a hard line

For a politician, European Competition Commissioner Neelie Kroes is a pretty straight talker. Having spent a great deal of her time over the past two years negotiating with representatives from Europe’s banks, she made a point of opening a recent speech at fund manager Algemene Pensioen Groep in Amsterdam with the quip: “It is not often I get to speak to a group of people who want to be more responsible regarding our banks.”

The gloves are certainly off between Kroes and those banks in Europe that have turned to government support to get through the crisis. Traditionally opposed to the principle of state aid, Kroes has been forced to put her opinions on hold over the past two years and approve rescue packages for more than 40 European banks including ING, Lloyds, RBS, KBC, Dexia, LBBW and several Irish banks. But now it is payback time.

Despite the best efforts of chief executive Jan Hommen to present ING’s restructuring as a consensus decision, it is hard to believe that shrinking the bank to half its current size is what he meant by “back to basics”. The sale of the insurance business was an obvious move for the bank, but the sale of ING Direct USA as well is over and above what many expected. Selling the insurance arm should get the key gross asset leverage figure down to just above 25:1, something that the EC might have been expected to be comfortable with. But it seems that it was not. The premise that rescued banks must not only be forced to pay back the state aid that they have received but also ensure that they are not in a position to need it again is something that Kroes takes very seriously indeed. “I am highly surprised that some commentators, investors and the banks themselves claimed to be shocked at the changes we are working towards when news emerged in recent weeks,” she commented in November.

A Dutch citizen, Kroes was formerly transportation minister of the Netherlands and was appointed to the European Commission in 2004. Her term expires at the end of this year, and she is certainly going out with a bang. Given the profile she has achieved in wrestling with the entrenched interests in the banking market, it is unlikely her influence will be leaving with her.