(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own)
By George Hay
LONDON, Jan 24 (Reuters Breakingviews) - SNS Reaal’s SR.AS
difficulties show that bank rescues are still stuck in 2008. The
Dutch bancassurer is running out of options to address big
losses on its commercial property exposures. The government has
a chance to test a new law that gives it wide intervention
powers . But even with these, the Dutch taxpayer may have to
contribute – again.
SNS’s biggest problem is that its owns around 4 billion
euros of non-core commercial property loans, 41 percent of which
are non-performing. Further losses will make it harder to
bolster the bank’s relatively puny 8.8 percent Basel II capital
ratio. Meanwhile, SNS has to pay back 750 million euros of
previous bailout cash by December, or face European Commission
penalties. A rights issue is out of the question, since the
shares are trading below 0.1 times book value.
Under the old Dutch regulatory system, the supervisor’s
hands were tied. Even though SNS’s reliance on wholesale funding
leaves it vulnerable to a run – its bank’s loans represent 146
percent of deposits – regulators couldn’t proactively chop the
bank up without triggering shareholder lawsuits. The
Intervention Act, voted by parliament last June, makes this
What this means for SNS remains unclear. The government
could try to interest private buyers in SNS assets. But the
European Commission has banned domestic lenders like ABN Amro
and ING ING.AS – which were bailed out themselves – from
making any acquisitions. The government could also nationalize
the company, place the offending property exposure in a bad bank
– which could be structured like Spain’s so that it is majority
owned by private investors – and then sell off the healthy
But what it probably won’t do in any case is spare
taxpayers. If assets are transferred to a bad bank, they will be
at big discounts, which will open capital holes in the size of
billions of euros. The best way to fill these would be by
haircutting senior creditors: SNS’s bank has 22.5 billion euros
of that type of funding, some of which is likely to be
But don’t hold your breath: the Dutch government is unlikely
to contemplate burning senior creditors. Denmark tried that in
2011, and senior unsecured financing then dried up for its other
banks. And that’s the reason why SNS recap money will probably
end up coming from taxpayers – as usual.
SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS:
- A nationalisation of Dutch bancassurer SNS Reaal is “a
serious option”, De Telegraaf newspaper reported on Jan. 23
without naming sources.
- The country's fourth biggest lender is suffering from
large losses on its property exposure, and also needs to repay
750 million euros in bailout cash to the Dutch government by the
end of 2013.
- SNS Reaal is looking at several scenarios with several
stakeholders, and no decision has been taken as yet, a
spokesperson told Reuters.
- SNS Reaal shares fell 11.7 percent on Jan. 23 and a
further 8 pct to 0.71 euros on Jan. 24.
- Reuters: Dutch nationalisation of SNS Reaal serious
- For previous columns by the author, Reuters customers can
click on [HAY/]
(Editing by Pierre Briançon and David Evans)
Keywords: BREAKINGVIEWS SNS/
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