29jul10

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EU again extends ABN AMRO aid review: source

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EU regulators have extended their temporary approval of state aid to nationalized Dutch banks ABN AMRO and Fortis Bank Nederland until their probe is completed, a European Commission source said on Thursday.

The European Union executive had temporarily cleared an additional recapitalization package for the two banks in February until July 31 while it determines whether the package complies with the rules on state aid.

Official confirmation of the extension, which had been expected at midday Thursday, is now likely to come Friday.

"We remain in consultation with the European Commission about the state aid of ABN AMRO/Fortis Bank Nederland," a spokeswoman for the Dutch Finance Ministry said in response to word of the extended review.

The Dutch government nationalized the local operations of the Belgian banking and insurance conglomerate Fortis in October 2008, including ABN AMRO and Fortis Bank Nederland.

Between the nationalization and two subsequent capital injections in the summer and autumn of 2009, the government has spent more than 26 billion euros ($33.84 billion) buying and supporting what is now known as ABN AMRO Group NV.

That made ABN one of the costliest casualties of the credit crisis, and Chief Executive Gerrit Zalm has said he does not expect Dutch taxpayers to get their money back when the bank is privatized in 2013 or 2014.

Before any privatization, however, the two banks have to actually be combined and streamlined. Their legal merger was completed in early July, but their operational combination -- including layoffs, cost cuttings and back-end integration -- is expected to take until the end of 2011.

When the integration is finally completed, the new ABN AMRO Bank is expected to be the Netherlands' largest wealth manager, one of its two largest commercial banks and the third-largest retail savings bank.

[Source: By Foo Yun Chee and Ben Berkowitz, Reuters, Brussels and Amsterdam, 29Jul10]

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