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October 13, 2009

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Dutch central bank takes control of DSB

THE Dutch central bank seized control of the troubled DSB Bank yesterday after efforts to preserve it with a consortium of five larger banks failed.
The central bank said in a statement it had been appointed administrator of DSB, a privately held bank with about 8 billion euros (US$11.8 billion) in assets that was a well-known lender despite its relatively small size.
The central bank said it sought unsuccessfully to preserve DSB's operations through a consortium of ING, SNS Reaal, Rabobank and the nationalized ABN AMRO and Fortis Bank Nederland.
Those talks failed, the central bank said, over concerns about loan losses and potential claims against DSB.
DSB was not immediately available to comment.
Customers of the bank are no longer able to access their money except by ATM withdrawal, which will only be available until midnight tomorrow. After that, customers will have to wait up to three months to get their money back via the state's deposit guarantee scheme.
Though deposits are guaranteed up to 100,000 euros, the central bank's Website says they are also offset against debts. A customer who has both savings and a mortgage with the bank, in other words, will have their savings credited against the mortgage balance and will not be able to get cash back.
DSB competitors are likely to feel the pain too, as the deposit guarantees are funded partly by other Dutch banks.
Evolution Securities analyst Jaap Meijer, in a note to clients, said ING and SNS would likely be hurt, given their larger market share for savings.
DSB, founded in 1975, claims a market share of 0.5 percent in mortgages and 15 percent in consumer loans.
It is wholly owned by its founder Dirk Scheringa.
While small-bank seizures are common some places - 98 in the United States this year alone - they are far more unusual in Europe. Generally, small banks in Europe were not able to get themselves in as much trouble as elsewhere.


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