AMSTERDAM, Netherlands — The Dutch government said Sunday it will inject $13.4 billion into ING Groep NV to shore up the bank and insurance company amid market rumors that it was running out of capital.
Finance Minister Wouter Bos said the deal was necessary, given the recent extreme volatility of global financial markets.
ING is “a healthy financial institution,” Bos said at a news conference held at the offices of the country’s central bank in Amsterdam.
But “the situation in the market is so unpredictable at this point in time, so risky, and the expectations of the market are such that it is in the interest of ING to strengthen its capital by 10 billion euros.”
The move is the latest case of a government stepping in to help shore up the books of a financial company hammered by the worldwide credit crisis.
Among moves in the U.S., the Federal Reserve is loaning American International Group $123 billion, while the government plans to buy about $250 billion in major bank stocks.
In Europe, the German government helped bail out mortgage lender Hypo Real Estate and Britain partially nationalized lender Bradford & Bingley.
The Dutch government will name two members to ING’s supervisory board. Bos said one condition of the deal is that ING chief executive Michel Tilmant and other managers will receive no more than a year’s pay if they are dismissed.
Amsterdam-based ING said separately it will cancel dividends for the rest of the year.
S. Korea takes action
Meanwhile, South Korea acted Sunday to shore up a tumbling stock market and a troubled currency. It announced that it would guarantee $100 billion in foreign debt and supply $30 billion to banks and exporters in urgent need of dollars.
Credit-rating agency Standard & Poor’s placed five major South Korean banks on a watch list last week, citing their problems in finding dollars to repay foreign currency loans.
President Lee Myung-bak has pleaded with citizens to stop hoarding dollars and “refrain from greedily pursuing private interests.”
Finance and central-bank officials in Seoul had insisted that the fundamentals of their country’s economy were strong and said the foreign media were exaggerating financial problems.
On Sunday, though, the government conceded that fear has trumped fundamentals.
South Korea’s currency, the won, is down 30 percent against the dollar this year, making it the biggest loser among major world currencies. The stock market has fallen 38 percent. Panicky foreign investors have pulled more than half of their holdings out of South Korean stocks.
