Fourth-Largest Dutch Bank (SNS Reaal) Nationalised

Equity investors and subordinated bondholders bailed in but line drawn at senior/’ordinary’ bondholders.

FT story here.

Fitch’s warning against bailing in ordinary bondholders covered in this related post.

24 replies on “Fourth-Largest Dutch Bank (SNS Reaal) Nationalised”

Is it only about bankers..I see the are back at their old tricks again. Good article on food speculation by Deutche Bank and others…
“As a result, the markets in which contracts for agricultural commodities are traded have developed a life of their own. The volume of financial transactions is between 20 and 30 times as large as the real transactions. This would certainly be unnecessary if it were purely for the purpose of hedging against risk. In other words, speculation is the real objective. And, yet, are we to believe that speculation doesn’t impact real prices?”


You’ve linked to that letter a thousand times now. We all know banks based their lending on, and accepted as collateral, bubble-value properties, leading to their collapse. You don’t have any particular insight on this.


The surveyors/auctioneers i.e the property professionals are a self regulated organisation which in Ireland means no regulation. These property professionals were responsible for three practices which created the bubble.

First the valuation error i.e valuing all 5 euro notes as 20 euro
Second the ruinous commercial property lease law organised by a criminal cartel. The corrupt politicians in Leinster politicians colluded with this cartel and the Irish sovereign signed thousands of these feudal leases for the corrupt politicians bagmen.
And third ,ninty five per cent of all property sold in the state is sold by surveyors/auctioneers.
They controlled where the property advertising money was spent. Almost all of it was spent with the broadsheet media and the Irish Times, the mouthpiece for the property industry and owner of , got the lion’s share. These property professionals controlled the Irish Times property propaganda and all the other broadsheet media property propaganda. They had enormous influence in these papers editorial policies.

This third item was the fatal one–the media faciltating this propaganda, the result of which was the greatest bank and property crash in the history of mankind.


The banking model of loading up with leverage and using that as the springboard to earnings growth is broken so some have obviously diversified into other sectors such as food speculation.

Banks nowadays do well to earn a 10% return on capital.

Ireland–A Democracy or a Propertyocracy?

In a democracy power comes from the ballot box. Politics is like war,there are three things you need to succeed. The first is money,the second is money and the third is money.
The group who provide the vast bulk of money which finances Irish politics is ,the cowboy builders,the cowboy developers and the property interests. They own almost all Irish politicians. The payback for this financing is — a corrupt planning system,no residential rates,mortgage tax relief,section 23/24 etc tax breaks, BES schemes,and feudal commercial property lease law i.e. upward-only rent reviews tied to long leases,which the sovereign signed up,on behalf of the taxpayers, and copperfastened it for all commercial tenants.
Many of this group are alumni of The Galway Tent School of Economics. The politicians look after themselves first-then their property interests. The public interest is irrelevant to the politicians –if they bankrupt the country –who cares?
When Fine Gael and Labour did their u-turn on on their promise to grant all commercial tenants in existing upward-only rent review leases ,a rent review in 2011 –they were merely being consistent–looking after the interests of their bagmen. Follow the money it always leads to Leinster house.

Welcome to Europe’s only Propertyocracy,home of the greatest bank and property crash in the history of mankind

via AP

“This is a unique situation and we have prevented worse outcomes with
this solution, but it is nothing to be satisfied about,” Sijbrand said.

SNS had warned with increasing frequency that its troubles would require
some kind of restructuring since July, and was in talks with private
parties about a takeover up until Thursday afternoon.

The three biggest Dutch banks, ING Groep NV, ABN Amro, and
cooperative bank Rabobank NV had reportedly considered buying parts
of SNS. But European regulators blocked ING and ABN for the reason
that they were themselves bailed-out and nationalized, respectively.

Is not the crucial point from an Irish perspective that adverted to in the post i.e. drawing the line at senior/”ordinary” bondholders?

If it holds, this will tend to confirm that the reasoning of the ECB in Ireland’s case with regard to not burning senior bondholders still holds or, rather, that EA governments in general shared it and continue to do so.

The second post notes;

“As the wipeout of ordinary, unsecured bondholders of a major European bank becomes increasingly likely, Fitch, one of the three major rating agencies, has issued a stark warning. In an interview with the Dutch Financieele Dagblad on January 24, managing director and research analyst Bridget Gandy of Fitch said: “If an important country in Europe wipes out a troubled bank’s ordinary bondholders, it would fundamentally change the way we view [European] banks.”

According to Gandy, Fitch currently assumes with 99.5 per cent certainty that ordinary bondholders will be made whole in any bailout of a major bank. “If that assumption proves wrong, banks’ ratings could be lowered to the so-called Viability Rating, which reflects the intrinsic creditworthiness of an issuer, without taking into account any implicit or explicit state guarantee. The viability rating at major banks is typically at least two steps below the actual rating.”

The story so far!

It seems that, at almost every juncture, events elsewhere have conspired to delay movement. Are things about to change? This little noticed item in the Indo reports Merkel as being “optimistic” about the outcome of the negotiations next week on the EU’s long-term budget. Now, that is news!

An element to be considered also is the collapse of consumer confidence in Germany. 2013 is after all an election year. (22 September has been confirmed as the elction date).

“If that assumption proves wrong, banks’ ratings could be lowered to the so-called Viability Rating, which reflects the intrinsic creditworthiness of an issuer…”

…and investors would henceforth have to discipline banks to behave prudently… which would be unconscionable, it, …it would be like taking Western banking back to 1990 or something. Can you imagine?!!!

Slice of Moral Hazard cake anyone?

Bank ratings would be lowered but then the hunt for yield would intervene. Where would it end?

So shareholders gone, subbies seriously written down.

But what about unsecured seniors? or have have they drawn the line at “all seniors”?

The only reason our country has this feudal commercial property lease law is because the Irish state signed thousands of these ruinous leases for the corrupt politicians bagmen pals and wasted billions of Irish taxpayers money. Check out Chairlie Haughey bagmen-they are all sovereign landlords.

Using a bit of vector auto regressive analysis the IMF thinks everything is grand…
“The emerging conclusion is that Ireland, which has regained cost competitiveness following the crisis-driven fall in domestic prices, is poised to return to its path of strong exports and economic growth and lower imbalances provided that it maintains competitiveness, though a pickup in external demand is critical. Three main findings underpin this conclusion. First, external demand is an important driver of exports and also the single most important determinant of Ireland’s GDP and government revenue. Second, declines in price competitiveness, featured by real effective exchange rate (REER) appreciations, restrain exports and economic growth. Third, exports boost output, which in turn enhances fiscal performance. ”
It’s that dreaded term “provided that” the concerns me.

Commercial rents are only the symptom it’s the ruinous Irish commercial lease lawi.e.upward-only rent reviews tied to long leases,is the disease. Enda Kenny and Eamon Gilmore can act tomorrow to stop this slaughter. Why are Kenny and Gilmore telling porkie pies??

Below is a summary of the opinion of the leading constitutional lawyer in the state Gerard Hogan SC now a High Court judge; which states clearly tenants can obtain market rents today;

There was no constitutional issue.

“In summary, therefore, I am of the view that:
A. Any legislation which rendered void pre-existing contractual commitments providing for upwards-only rent review would deprive the landlords of a valuable contractual right without compensation. This, however, is not a dispositive consideration, since legislative interference with contractual rights along these lines is
not uncommon, i.e., the very point which Costello J. made in Cafolla.
B. The critical question is rather whether such legislation would be proportionate and objectively justifiable. For the reasons set out in this opinion, there are far reaching policy reasons why the Oireachtas might think that the prohibition of such clauses is
necessary in the public interest. Not the least of those reasons is that the Oireachtas might consider that such clauses artificially maintain unrealistically high rental levels in the retail sector, thus hindering the recovery of the retail sector. Of course, given
the high importance of the retail sector to the volume of economic transactions and consumer confidence, the economy as a whole cannot fully recover from an economic crash without the recovery of that sector.
C. In my view, any such proposed legislation is no different in principle from many other forms of legislation which preclude or render void pre- existing business practices provided for by contract. The proposed legislation satisfies the proportionality
test in that –
i. It is rationally connected to an objective of sufficient importance (i.e., recovery in the retail sector) to warrant interference with a constitutionally protected right and, given the serious social problems which they are designed to meet, they undoubtedly relate to concerns which, in a free and democratic society, should be regarded as pressing and substantial.
ii. Such legislation would also impair those rights as little as possible and their effects on those rights are proportionate to the objectives sought to be attained in that it would simply provide a mechanism whereby rents could be assessed by reference to prevailing market conditions and deflation.
iii. Critically, such legislation would not attack the essence of the contractual right, namely, the right to receive a market rent and, unlike cases such as Blake, it would not involve one sector of society (namely, landlords) being expected unfairly to bear the burdens from other sectors of society are exempt.
D. No difference in principle can be drawn between the proposed legislation and the FEMPI Act. Certainly, if the Oireachtas can constitutionally take steps drastically to interfere with existing contractual rights of service providers and public servants without compensation (as the High Court has already held in the JJ Haire case), then the proposed legislation of this kind would equally seem to be constitutionally


NO. The IMF does not. Views are of the author only.

BTW, can you thinik of anything positive to say?

@ grumpy

Willingly or not, a return to the 1990s in banking is what is happening. It takes time.

There is uproar in the Netherlands over the salary of the new head of the bank – 550,000 euros – which serves to illustrate that the public’s perception of the symbiotic link between banks and sovereigns is the same, whether in the core as a creditor nation or the periphery as a debtor.

“Is not the crucial point from an Irish perspective that adverted to in the post i.e. drawing the line at senior/”ordinary” bondholders?”

The relevant bits for Ireland as far as I can see are;

1. The Netherlands introduced a new Banking Law in 2012 that allowed them to burn the subordinated bondholders completely. IBRC and BOI, are still being squeezed like lemons by the friendliest of hedgies.

2. “In addition, the government will levy a one-time tariff of €1bn on Dutch banks in 2014”. Well what do you know! It would take this country four years of comfort zoning the ECB, just to be told to get lost with that proposal.

3. “The finance ministry said the bank’s management would receive no bonuses, and that salary cuts were to be expected”. But who knows, the sneaky Dutch bank, may transfer 1 billion to top up their pension fund!

We are so far behind the curve, that we don’t appear on the graph page at all.

But, what is the Netherlands word for ‘schadenfreude’!

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