A Dutch court began considering a legal appeal by investors in SNS Reaal NV (SR), the country’s fourth- largest bank, after the government nationalized it and then refused to pay them compensation.
“The minister is sorry for the losses,” Richard de Haan, a lawyer at Allen & Overy LLP in Amsterdam representing Finance Minister Jeroen Dijsselbloem, told the Enterprise Chamber of the Amsterdam Court of Appeal today in sessions due to last two days. “However, these losses were not the consequence of the expropriation.”
Dijsselbloem set compensation for SNS Reaal’s bond and shareholders at zero after the February takeover, saying taxpayers will be required to pay 3.7 billion euros ($4.8 billion) in capital injections and write-offs and 6.1 billion euros in loans and guarantees to help rescue the bank. Losses on real estate had brought it to the brink of collapse.
Dutch law says the Netherlands must compensate investors, though it can take into account the company’s future prospects had SNS not been nationalized. Dijsselbloem said last month that investors wouldn’t get a cent from the government because there wouldn’t have been any capital left for them had the firm been liquidated.
SNS would have debt of 6.6 billion euros compared with 2.1 billion euros in assets had it been liquidated rather than nationalized, leaving it with a 4.5 billion-euro shortfall to pay creditors, government lawyers said. At least 565 million euros in state aid that SNS received in 2008 would also need to be deducted before repaying investors, they said.
The court hasn’t provided a date for a ruling in the case.
Dijsselbloem, sworn in on Nov. 5, became the first finance minister in the Netherlands to use powers granted under legislation introduced last year allowing the central bank to transfer assets and liabilities to a troubled bank. He may expropriate assets in case of a grave and immediate threat to the stability of the financial system, according to the law.
Expropriation of the assets of SNS Reaal’s creditors has reduced rescue costs for the Netherlands by about 1 billion euros, the government has said.
The highest administrative court ruled on Feb. 25 that Dijsselbloem was entitled to intervene, making the nationalization irrevocable.
To contact the reporter on this story: Maud van Gaal in Amsterdam at mvangaal@bloomberg.net
To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net