Commission approves recapitalisation for Dutch bancassurance company SNS REAAL
29 January 2010
The viability plan refocuses SNS’s business model on its core activities in the Dutch retail and SME market. The plan aims to improve the risk profile of its insurance and banking business by reducing the size of its equity portfolio.
The European Commission has approved, under EU state aid rules for restructuring of banks, the recapitalisation of the Dutch bancassurance company SNS REAAL after a detailed assessment of the company's viability plan submitted by the Dutch authorities on 16 October 2009. On 10 December 2008, the Commission approved the recapitalisation on a temporary basis as a rescue measure. The plan confirms that SNS has a viable business model, while ensuring the company’s sufficient contribution of to the restructuring costs and limiting undue distortions of competition. The Commission therefore concluded that the aid was in line with its bank restructuring Communication and as such compatible with Article 107.3.b of the Treaty on the Functioning of the European Union (TFEU) that allows aid to remedy a serious disruption of a member state's economy.
Competition Commissioner Neelie Kroes said: "The Commission’s assessment shows that SNS’s business model is viable. The state support received by SNS is of limited size and the financial projections submitted to the Commission show that thanks to a number of measures to reduce risks SNS is now in a position to face up to adverse economic conditions."
In December 2008, the Dutch State injected €750 million in new capital in the form of core Tier 1 securities. The coupon of these instruments is set to be the higher of either 8.5 per cent or an increasing percentage of the dividend paid on ordinary shares. The repurchase price of the securities is fixed at 150 per cent of the issue price. One third of the securities can be repaid within 12 months on more favourable terms. Alternatively the securities can be converted into ordinary shares after three years from issuance. Simultaneously to the capital injection by the Dutch State, SNS REAAL Foundation, a strategic shareholder of SNS injected €500 million in the company.
The viability plan refocuses SNS’s business model on its core activities in the Dutch retail and SME market. The plan aims to improve the risk profile of its insurance and banking business by reducing the size of its equity portfolio, entering into extra reinsurance contracts and improving its assets-and-liabilities management. Furthermore, SNS has decided to gradually run-off its international property project finance activities.
The viability plan includes financial projections in a stress scenario and a sensitivity analysis testing to what extent the company's solvency would be impacted by adverse developments.
© European Commission
