The Dutch state has nationalised banking and insurance group SNS Reaal at a cost of 3.7 billion euros ($5 billion), Finance Minister Jeroen Dijsselbloem said on Friday, averting a threat to the Dutch financial system.
"Today, SNS Reaal has been fully taken over by the Dutch state. I have nationalised SNS Reaal," Dijsselbloem told a press conference, after a deadline expired to find a solution for the distressed bank.
"With the Dutch Central Bank's deadline passing last night and without finding a solution there was an immediate and dangerous situation for financial stability," Dijsselbloem said.
"I had to conclude that nationalisation was inevitable."
The bank is known as the fourth-biggest in the Netherlands, and the finance ministry said in a statement that savings deposited there were safe.
The bank "came into acute need because of problems with its property portfolio," it said.
The bank has suffered recurring losses in recent years linked to its Property Finance subsidiary, bought from ABN Amro bank in 2006. The bank is otherwise in relatively good health.
SNS Reaal is considered a systemically important bank, meaning it is too important to be allowed to go bankrupt.
Dijsselbloem, who has just been named head of the Eurogroup of eurozone finance ministers, said that SNS Reaal's chief executive officer and chief financial officer had resigned.
"I can fully understand people's resistance in the fact that once again a large amount of money is needed to save a bank -- and especially now that when we are going through a financially difficult time," Dijsselbloem said.
Shares in SNS Reaal have plunged in recent days amid speculation that the government would nationalise the bank.
Dijsselbloem said the 3.7 billion euros would consist of a 2.2-billion euro capital injection, 800 million euros to write off previous state support and 700 million euros to isolate the bank's problematic property portfolio.
"The state will also supply 1.1 billion euros in bridging credit and 5.0 billion euros in guarantees," Dijsselbloem said.
In January, the European Commission blocked a plan by three other Dutch banking giants, ABN Amro, ING and Rabobank to help SNS with a capital investment, on competition grounds saying that ABN and ING had themselves previously received state aid.
"The necessity for the state to once again intervene, especially considering the previous state interventions in 2008, is a blow to our efforts to make the Dutch financial sector robust again and get it back on its feet," Dijsselbloem acknowledged.
The Dutch government nationalised SNS Reaal using a new Intervention Law, which came into force in June 2012 and allows the state to demand that those holding a bank's bonds contribute to its rescue.
The European Commission last year put forward proposals for bank bailouts that would also require bond and shareholders rather than the taxpayer to pay.
The commission has said it will draw up a directive for dealing with bank bailouts by the summer.
Trading in SNS Reaal shares was suspended on the Amsterdam stock exchange at 0.84 euros, down from a high of around 15 euros in 2008, before the financial crisis.