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The Netherlands 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," he said, after reported talks with private equity firm CVC capital collapsed.
The finance ministry said in a statement that savings deposited in the country's fourth-largest bank were safe.
SNS Reaal 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 to 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.
Dutch banks are now to contribute one billion euros to the bailout in 2014 but in a different form, the finance ministry said.
The bailout will have an impact on the Dutch economy, increasing the 2013 deficit by 0.6 percent and debt by 1.6 percent.
The expropriation of shareholders and subordinated bond holders means that the Dutch state saves one billion euros, the ministry said. Common bond holders' investments however were not affected.
"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 for the first time.
The law came into force in June 2012 and allows the state, in consultation with the Dutch Central Bank, to demand that those holding bonds issued by a bank contribute to rescuing the bank if it fails.
Last year, the European Commission put forward proposals for bank bailouts that would also require bondholders 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 point of about 15 euros in 2008, before the financial crisis.
Tom Muller, an analyst at Theodoor Gilissen private bankers, hailed Dijsselbloem's intervention as a good example for other European Union countries.
It showed that "even in a healthy country like the Netherlands, these situations of unaccountability will no longer be tolerated."
"These situations must be tackled," Muller said.
But Muller said he believed today's intervention may have negative implications for Dutch banks' ratings, with Fitch ratings agency warning last month that expropriation could have serious consequences.