Financial Regulatory Forum

Dutch central bank seizes DSB; govt plans probe

October 12, 2009

dsb-bank   By Gilbert Kreijger and Ben Berkowitz
   AMSTERDAM, Oct 12 (Reuters) – The Dutch central bank seized control of the troubled DSB Bank on Monday after efforts to preserve it with a consortium of five larger banks failed.
   The central bank said in a statement it had been appointed administrator of DSB, a privately held bank that was a well-known lender despite its small size. It also had extensive political connections, with two former government ministers serving as Chief Financial Officer in recent years.
   Dutch Finance Minister Wouter Bos said the government will investigate the conduct of current and former board members, including former finance minister and current ABN AMRO Chief Executive Gerrit Zalm. Zalm has agreed to cooperate with the probe, Bos said at a press conference at the central bank.
   “We want to know exactly what happened with DSB. I will start an independent investigation into the policies of the bank and we will also look at regulations and the manner in which supervisory authorities have functioned,” Bos said.
   The central bank said it sought unsuccessfully to preserve DSB’s operations through a consortium of ING <ING.AS>, SNS Reaal <SR.AS>, Rabobank [RABN.UL] and the nationalised ABN AMRO [ABNNV.UL] and Fortis Bank Nederland [FORTH.UL].
   Those talks failed, the central bank said, over concerns about loan losses and potential claims against DSB. Central Bank President Nout Wellink said the company’s administrators expected its assets to be liquidated.
   The takeover followed closely on reports in the main Dutch morning newspapers that DSB was in trouble. DSB’s founder and owner, Dirk Scheringa, reacted angrily.
   “If you start leaking that it’s not going well with the company, then there can be no rescue,” he told state TV NOS. Asked whether the problem was caused by the central bank and the finance ministry, Scheringa said: “Yes, that’s what we think.”
   
   NO MORE ACCESS
   The 350,000 to 400,000 account holders of the bank are no longer able to access their money except by ATM withdrawal, which will only be available until midnight Wednesday, with a daily limit of 250 euros. After that, customers will have to wait up to three months to get their money back via the state’s deposit guarantee scheme.
   A DSB branch in a southern suburb of Amsterdam was shuttered with no customers outside, while one Dutch TV news film crew took footage of the building.
   Though deposits are guaranteed up to 100,000 euros, the central bank’s website says they are also offset against debts. A customer who has both savings and a mortgage with the bank, in other words, will have their savings credited against the mortgage balance and will not be able to get cash back.
   DSB competitors are likely to feel the pain too, as the deposit guarantees are funded partly by other Dutch banks. Evolution Securities analyst Jaap Meijer, in a note, said ING and SNS would likely be hurt, given their larger market share.
   ING shares were down 0.12 percent at 12.435 euros at 1312 GMT, and SNS Reaal shares were 1.11 percent higher at 6.167 euros, compared with a 1.62 percent rise in the Amsterdam blue chip index <.AEX>.
   In a statement AZ Alkmaar said after talks with the Dutch football association the collapse of DSB would not affect the team, as its sponsorship money for the year was already paid up.
   
   DIFFICULT FEW MONTHS
   While seizures of small banks like DSB are common some places — 98 in the United States this year alone — they are far more unusual in Europe. Generally, small banks in Europe were not able to get themselves in as much trouble as elsewhere.
   Yet the takeover culminates a difficult few months for DSB, which made its name with discount loans and heavy advertising.
   On Oct. 1 the head of a foundation representing angry DSB customers went on national TV and urged DSB clients to withdraw their money. [ID:nL1318370] The central bank’s Wellink said Monday about one-sixth of DSB’s deposits were withdrawn since.
   In July, DSB was fined by the market regulator for “overcrediting,” or lending people more than they could afford to borrow. Those loans were made in early 2008 while former finance minister Gerrit Zalm was DSB’s chief financial officer.
   The government has defended Zalm, who it plucked from DSB to run the nationalised ABN AMRO, and Zalm has denied wrongdoing.
    Please double-click on the newslinks below for recent stories about: [NL-FIN-RTRS-LEN]      Dutch financial sector [NL-MCE-RTRS-LEN]      The Dutch economy
    (Reporting by Ben Berkowitz and Gilbert Kreijger; Editing by David Holmes and Hans Peters) ($1=.6795 Euro)
 ((ben.berkowitz@thomsonreuters.com; +31 20 504 5011; Reuters Messaging: ben.berkowitz.reuters.com@reuters.net))
 Keywords: DSB/ 
  
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 Monday, 12 October 2009 14:34:01RTRS [nLC637889] {EN}ENDS

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