Dutch applauded over ‘realistic’ ING scheme

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The British Government's bailout is structured as an insurance scheme whereby the bank will shoulder a fixed percentage of its losses with the taxpayer stepping in to insure the rest.Treasury mandarins have been working night and day to thrash out how much of the losses should be borne by the taxpayer and how much by the banks.

A US version of the scheme is insisting its banks pay the first 8%, but leaks last week suggested the British Government was looking at a level of
about 2% — meaning that a far bigger burden would be shouldered by the taxpayer.

The Dutch have come up with a far more generous scheme, requiring very little from ING in return for its cash.

While it may be "politically incorrect", analysts said it reflected a realistic view of the fact that banks needed to be helped, not hindered with punitive charges and a threat of nationalisation that has destroyed share prices and weakened their balance sheets.

In its deal, the Dutch state takes on the risks of 80% of ING's 27.7 billion (£26 billion) portfolio of risky mortgages — technically called Alt-A mortgages — allowing it 80% of the profits or losses the products make over time.

Conscious of the need to keep ING strong enough to get its lending capabilities back to more normal levels, the Dutch have gone out of their way to avoid punitive charges or demand ING shares as payment — the creeping nationalisation being witnessed in the UK.

They are even valuing the Alt-A securities they are taking at well above the odds — paying about 90% of their value when the current market price would be more like 65%.

ING will pay the government a fee for the help, but that will be offset by a management charge paid by the Dutch government to ING.

"The Dutch have done what the UK needs to do," said Jon Kirk, banking analyst at researcher Redburn.