Feb 5 (Reuters) – The Netherlands’ nationalization of bank
SNS Reaal underlines the euro zone’s weak spots while
illustrating the dangers of its plans to address them.
In wiping out SNS shareholders and some bond holders the
Dutch government is trying to do the right thing, can’t quite
bring itself to go that far, and may end up paying the price
The Netherlands last week seized control of SNS, its
fourth-largest financial services firm, in a $14 billion rescue,
employing powers granted it under a new law passed last year.
While senior bondholders and depositors were sheltered, the
stakes of equity holders and subordinated bondholders were
SNS, which had already received one state bailout, was
struggling under the weight of a large book of bad real estate
loans and was suffering strong outflows of deposits thanks to
First off, the news demonstrates that Europe’s banking
problems are far from over. Though optimists might argue that
the bad loans SNS was on the hook for were already well known,
the fact remains that the banking system across the euro zone
and beyond is still struggling under the weight of bad lending
decisions made before the crisis hit.