EU regulators today extended an in-depth investigation into state aid granted to nationalised Dutch banks ABN AMRO and Fortis Bank Nederland and temporarily approved a €6.9 billion recapitalisation to finance their merger.
The European Commission said it would assess the combined effect of all the aid and the recapitalisation to ensure it did not skew competition.
The Dutch government has committed a total of more than €23 billion since October 2008 to the nationalisation and recapitalisation process, making it one of the world's costliest bailouts since the financial crisis began.
The government wants to merge the two companies and eventually privatise the combined group as part of its exit strategy for the banks, which it nationalised in October 2008 for €16.8 billion.
"This recapitalisation package is a further step towards the restructuring of Fortis Bank Nederland and ABN AMRO," Competition Commissioner Neelie Kroes said in a statement.
"I sincerely hope that ABN AMRO and Fortis will rapidly finalise their integration plans and resume their role as lender to the real economy in the Netherlands," she said.
The Dutch finance ministry said in a statement: "We are happy with the decision which gives us the opportunity to work further on integration of the banks."
The recapitalisation, approved until July 31st, includes a guarantee on a €34.5 billion portfolio of Dutch mortgage loans and the subscription to a mandatory convertible security of €3.1 million.
It also covers the conversion into capital of Tier 2 loans granted to Fortis, a cash payment of €740 million and the provision of a counter guarantee on a €950 million liability.
The Commission's decision follows the completion on Saturday of the complicated legal demerger of the ABN AMRO businesses owned by the Dutch state from the businesses owned by the Royal Bank of Scotland.
The procedure left two separate companies, Royal Bank of Scotland NV and ABN AMRO Bank NV. Both of those companies remain technically owned by ABN AMRO Holding, which was acquired by a three-bank consortium in 2007.
With the legal demerger complete, the sides can now effect a legal separation, which will leave RBS NV inside ABN AMRO Holding and will transfer ABN AMRO Bank NV to a new holding company wholly owned by the Dutch state.
That process is expected to take another two months or so, ABN AMRO Bank said today.
The European Commission specifically noted that its decision Monday pertained only to the activities of nationalised ABN and Fortis and not any of the RBS businesses.
Once the legal separation is fully complete, the government can start the process of merging ABN AMRO Bank and Fortis Bank Nederland.
Reuters