IP/08/1951

Brussels, 11^th December 2008

State aid: Commission approves Dutch authorities' recapitalisation of SNS REAAL

The European Commission has approved, under EC Treaty state aid rules, an emergency recapitalisation worth €750 million that the Dutch authorities intend to grant to SNS REAAL N.V. The Commission found the measure to be in line with its Guidance Communications on state aid to overcome the current financial crisis (see IP/08/1495) and on the recapitalisation of financial institutions in the current financial crisis (see IP/08/1901). The measure constitutes an adequate means to remedy a serious disturbance in the Dutch economy while avoiding undue distortions of competition and is therefore compatible with Article 87.3.b. of the EC Treaty. In particular, the measure is limited in time and scope, requires an adequate remuneration and provides safeguards to minimise distortions of competition.

Competition Commissioner Neelie Kroes said: "The capital injection is necessary to restore the markets' confidence in SNS REAAL and to ensure the bank's contribution in providing loans to the real economy."

On 3 December 2008, the Dutch authorities notified their plans to recapitalise SNS REAAL N.V. with €750 million via a special type of securities. Furthermore SNS will receive €500 million through the issuance of core capital instruments to the private independent foundation Stichting Beheer SNS REAAL.

Due to the current financial crisis, even fundamentally sound institutions like SNS REAAL N.V. may experience distress and be required to reassure financial markets of their financial stability. Against this background, it was considered necessary to strengthen SNS REAAL N.V.'s capital base against possible future losses. Thus, the capital injection, alongside the capital injection from Stichting Beheer SNS REAAL, will increase the tier 1 ratio of SNS Bank N.V. to 10% and the solvency ratio of SNS Verzekeringen N.V. to 200%.

The securities to be issued would qualify as core tier 1 capital and produce an annual coupon equal to the higher of:

• € 0.45 per security, non cumulative, payable annually in arrears
• 110% of the dividend paid on the ordinary shares in 2009
• 120% of the dividend paid on the ordinary shares in 2010
• 125% of the dividend paid on the ordinary shares from 2011 onwards

The coupon will only be paid if a dividend is paid on ordinary shares or on B shares. If SNS REAAL N.V. decides to buy the securities back, it would have to pay the state 150% of the issue price, unless the shares were repurchased in the first year after the issuance. In the latter case, the state would receive 100% of the issue price plus accrued interests and a repurchase fee.

The Commission concluded that the measure complies with the conditions laid down in its Guidance Communications (see IP/08/1495 and IP/08/1901). In particular, the measures meet the following criteria:

• necessity: SNS REAAL N.V. has an important role within the Dutch financial sector - a loss of confidence in this institution would have led to a further disturbance of the current financial situation and harmful spill-over effects to the economy as whole
• limited temporal scope: the Dutch authorities have committed to submitting a plan after six months, showing how SNS REAAL will secure long term viability
• appropriate own contribution: even with the uncertainty inherent in core tier 1 securities, SNS REAAL N.V. would pay, taking into account the annual coupon and the repurchase options, an adequate remuneration to the state, with an expected return in excess of 10%. Adequate safeguards are in place so that the Commission is informed if there are any deviations and, if necessary, can impose additional behavioural constraints
• avoidance of undue distortions of competition: the package foresees sufficient behavioural rules to prevent an abuse of the state support, e.g. the maintenance of a certain solvency ratio.

The non-confidential version of the decision will be made available under the case number N 611/2008 in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.