EU takes swing at ING ahead of restructuring talks - Marketwatch

By MarketWatch

By Maarten van Tartwijk

AMSTERDAM -(MarketWatch)- The European Commission Friday launched a counterattack in its legal brawl with the Netherlands' ING Groep NV (INGA.AE, ING) and said it sees no reason to change much in the large restructuring plan it imposed on the bailed-out banking and insurance company.

The European Union's executive arm said late Friday that it will launch two investigations to find out whether ING has violated some of the terms it agreed to in order to win approval for the state aid received during the financial crisis in 2008.

It said it will investigate why ING didn't pay interest on the loans from the Dutch state in 2010 and 2011, even as the firm reported billions of euros in profits in these years. It will also look into complaints that ING Direct, the group's online-banking unit, used government support to offer competitive interest rates in Italy.

The move marks the latest chapter in a legal battle between the EU's antitrust regulator and ING, and comes ahead of negotiations on the Dutch group's restructuring plan.

The commission in 2009 ordered ING to cut its balance sheet by 45% as the price of approval for the EUR10 billion ($12.9 billion) aid it received. But it was forced to revise the decision in March, when the European Union Court of Justice ruled that the plan was based on a miscalculation of the government aid received.

The ruling was a blow to the commission, which has been tough on banks that were bailed out by taxpayer money during the financial crisis in 2008 and 2009. Many of the region's largest lenders--including the U.K's Royal Bank of Scotland PLC (RBS.LN, RBS) and Germany's Commerzbank AG (CBK.XE, CRZBY) -- were ordered to shrink their balance sheets in order to repay the aid and prevent them from using government support to gain a competitive advantage.

Analysts have said the court ruling, which the commission is appealing, could eventually result in less stringent terms for ING. The plan now requires it to divest its global insurance arm and some banking assets and prevents it from making acquisitions and offering competitive prices.

While ING has said it will proceed with the sale of the insurance business, it has warned that difficult market conditions and stricter banking regulations make it difficult to fully complete the program before the deadline of end-2013. Repaying the remaining EUR3 billion state support is also problematic in the current environment, it has said.

The EU's Competition Commisioner Joaquin Almunia Friday said he sees no reason to ease the terms. "As I still consider the plan proportionate to the restructuring requirements, there was no need to change much of the original decision," he said in a statement.

To meet some of ING's concerns, the commission will reconsider the required divestment of WestlandUtrecht Bank NV, a mortgage lender in the Netherlands that ING is struggling to sell. The commission said it will look at other options to address competitive distortions in ING's home market, without specifying.

ING said it will assess the decisions as well as the consequences. "ING is looking forward to a constructive dialogue with the [Dutch] state and the commission to resolve the outstanding issues," it said in a statement. It is unclear when the negotiations will start.