Dutch DSB Bank Nationalized After Bank Run

Dutch DSB Bank Nationalized After Bank Run By Clients

October 12th, 2009 | Author: Tyler Durden

And you thought the FDIC had its hand full in the US (even though the ominous "lack" of failures this past Friday prompted many to ask whether or not the FDIC has any funds left to even take over the hundreds of upcoming bank failures). As of this morning, well-known Dutch bank DSB Bank, which gives loan to lower-income people, has been put into "curatorship" (another words for taken over by its respective central bank), after its clients staged a full-blown bank run. This is probably not good news for the former secretary of finance Gerrit Zalm, who was previously CFO of DSB and is currently CEO of ABN/AMRO. BusinessWeek reports:

The Netherlands' central bank said Monday it has taken control of DSB Bank NV after clients began a run amid fears the regional lender might collapse. Doubts about the health of DSB, a small but well-known bank based in the north of the country, grew since the start of October as media reports questioned its solvency and clients began having problems withdrawing money from their Internet accounts. De Nederlandsche Bank said in a statement Monday it had asked the Amsterdam District Court to put DSB under its curatorship "because of a large outflow of liquidity that brought the existence of DSB in danger in the short term."

Not too unexpectedly were the bank's soothing words as recently as a week ago that it had enough capital to withstand a full blown run. Turns out it, like many of its counterparts across the Atlantic, has been lying:

DSB told critics at the start of October it had euro1.5 billion in cash -- enough of a buffer to withstand a run on its euro4.3 billion ($6.6 billion) in deposits.

Bank accounts in the Netherlands are insured by the government for the first euro100,000, and the central bank said customers would be able to pull money from their accounts using bank passes until midnight Wednesday.

Hilariousy, the Dutch Central Bank revised its optimistic statement from two weeks ago as well:

The central bank today said the solvency of closely held DSB Bank is under “great pressure,” revising an Oct. 1 statement that the lender met requirements for solvency and liquidity.

Keep in mind the Netherlands has been far off the radar screen for any major financial problem hotspots, especially with recent action directed more to the east, where everyone's attention has been focused on Latvia and how it's recent bond failure and currency devaluation will impact other Scandinavian countries, most prominently Sweden. Could this be the beginning of the FDIC's troubles spilling over to Europe? h/t Coder