ING and the Dutch government pass taxpayers the bill
ING has always protested that its portfolio of alt-A residential mortgage-backed securities was of much better underlying quality than many of the sub-prime deals that imploded at the start of this credit downturn in 2007.
|Jan Hommen: positive impact|
When the Dutch bank first secured a €10 billion capital injection from the Dutch government in October 2008, it was already exploring ways to ring-fence its exposure to further potential losses on this portfolio but hadn’t developed the right methodology for this. Then came the awful results of the fourth quarter of 2008, bringing further impairments on a portfolio of illiquid securities held for sale that the bank had to mark to a distressed price in a thin market. ING lost €2 billion on the portfolio in the fourth quarter, pushing the whole group into a loss for the year of approximately €400 million and requiring it to allocate more capital against the portfolio, leaving it with less capacity to make new loans. ING pushed forward plans to do a deal with the Dutch government to protect it against further losses and free up capital.