John Lounsbury's  Instablog

ING, one of Europe’s biggest financial groups, has announced a detailed plan of dismemberment.  This has been forced on the company by the European Commission, as a consequence of ING needing a capital infusion in the financial crisis.

The process starts immediately, as soon as the plan is approved by the Commission, expected to occur within a month.  A statement issued by ING (here)
 on Monday contained the following:

Jan Hommen, CEO of ING, commented: “Today we are announcing a comprehensive set of actions that, taken together, provide a clear plan for resolving the uncertainty created by the financial crisis and will launch a new era for ING. A little over one year ago, ING began to experience the direct impact of the financial crisis, resulting in two instances of government support to strengthen our capital position and to mitigate risk. Over the last six months, we have worked tirelessly - both inside ING and with the Dutch Government and the European Commission - to devise a plan that will enable us to pay back the Dutch State, address the EC’s requirements for viability and fair competition, and return our focus to the business and what matters most to our customers. We recognize the considerable efforts of the Dutch Government and the EC, and are pleased to have achieved understandings with them about how we will move forward.”


Some of the specific actions to be taken include:

*  Divestiture of all Insurance activities;
*  Divestiture of all Investment Management activities;
*  Divestiture of all "interadvies" (sic) - whatever that is;
*  Divestiture of existing consumer lending portfolio in the Netherlands;
*  Divestiture of ING Direct USA;
*  Elimination of double leverage;
*  Significantly reduce balance sheet.

The divestments may be through direct sales, IPOs or a combination of the two.  The entire process must be completed within four years (by end of 2013).

Some additional specific agreements with the Dutch government in the ING announcement:
 

• Agreement with Dutch State to facilitate early repayment of capital injection
• ING to repurchase EUR 5 billion of Core Tier 1 securities in December 2009 at a premium
• Additional payments to Dutch State in form of fee adjustments for Illiquid Assets Back-up Facility
• Additional IABF payments lead to one-off pre-tax charge of EUR 1.3 billion in Q4 2009
• EUR 7.5 billion rights issue to finance repayment and cover charge for additional IABF payments
• Further repayments to be financed from internal resources and divestment proceeds
  
  Compare this orderly process with the U.S. implementation regarding its two biggest sore thumbs, American Insurance Group (AIG) and CitiGroup (C).  These two floundering elephants have been thrown bundles of cash, large government equity positions taken and no reorganization plan established.
  
  AIG is obviously in a dismantling process, but there is no published plan.  That is probably because there is no plan.  Citi is bleeding cash like a drunken billionaire in Las Vegas.  In the past six quarters, C has lost more than $22 billion after proceeds from asset sales are removed from reported earnings (here).  The only way Citi is surviving is by selling assets.
  
  Washington:  Removing instability and resolving insolvency can be accomplished in an orderly manner.  Get a clue.
  
  More can be read about ING in an article by Michael Steen at ft.com (here).  
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• Disclosure:  Own SKF (Ultrashort Financial ProShares)