16.1 General information
SNS Bank NV, incorporated and established in the Netherlands, is a public limited liability company incorporated under the laws of the Netherlands. SNS Bank NV’s registered office is located at Croeselaan 1, 3521 BJ Utrecht. The consolidated financial statements of SNS Bank NV comprise the accounts of all the companies controlled by SNS Bank NV and the interest of SNS Bank NV in associated companies and entities.
SNS Bank NV is a 100% subsidiary of SNS REAAL NV. Stichting Beheer SNS REAAL had a 50.00001% interest in SNS REAAL till 1 February 2013. The shares were listed at the NYSE Euronext Amsterdam as part of the Amsterdam Midkap index. As of 1 February 2013, the Dutch State is the sole shareholder of SNS REAAL NV. Subsequently, the Dutch State transferred the shares to the Stichting administratiekantoor beheer financiële instellingen (NLFI) on 31 December 2013.
The information in the separate financial statements of SNS Bank NV differs from the segment information shown in the annual report of SNS REAAL NV as shown in the annual report of 2013. The difference is the result of intercompany transactions within SNS REAAL which are eliminated in the segment reporting of SNS Bank NV in the financial statements of SNS REAAL.
The main accounting principles used in the preparation of the consolidated financial statements and the company financial statements are set out in this section.
16.1.1 Adoption of the financial statements
The consolidated financial statements of SNS Bank NV for the year ended on 31 December 2013 were authorised for publication by the Management Board following their approval by the Supervisory Board on 26 March 2014. The financial statements will be submitted to the General Meeting of Shareholders of SNS Bank NV (Executive Board of
SNS REAAL NV) for adoption in April 2014.
Based on the articles of association of SNS REAAL NV, the adoption of the (consolidated) annual financial statements of SNS Bank NV by the Executive Board of SNS REAAL NV requires prior approval of the General Meeting of
Shareholders of SNS REAAL NV (NLFI).
16.2 Nationalisation and its implications
This chapter provides the outline of the nationalisation of SNS REAAL and its financial implications. Section 16.2.1 provides details of the events leading to the nationalisation, an outline of the nationalisation decree and the
nationalisation measures for SNS REAAL as a group. The remainder of the chapter, from section 16.2.2, provides an outline of the effects on SNS Bank NV. The effects of the temporary and final decision of the European Commission, in section 16.5.5, are described for SNS REAAL as a group.
16.2.1 Nationalisation
In January 2013, the Dutch Central Bank (DNB) informed SNS REAAL of its conclusion that the capital position of SNS Bank NV was insufficient to cover the company's current and possible future risks. SNS Bank NV was requested to present by 31 January 2013 a final solution for its capital position that according to the judgement of DNB would provide a sufficient degree of certainty of succeeding and that would furthermore result in supplementing the capital deficit that existed according to DNB. SNS Property Finance BV (Property Finance) had been an important factor in the arising of the capital deficit. In the opinion of DNB, the proposal of SNS REAAL NV offered insufficient certainty that the identified capital deficit could be addressed in the short term. DNB subsequently informed the Ministry of Finance that it no longer considered it sound for SNS Bank NV to continue to carry out its banking operations.
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all issued shares in the capital of SNS REAAL NV;•
all core Tier 1 capital securities issued by SNS REAAL NV to Stichting Beheer SNS REAAL (Stichting securities);•
all subordinated bonds of SNS REAAL NV and SNS Bank NV, including the participation certificates issued by SNS Bank NV;•
subordinated private debts of SNS REAAL NV and SNS Bank NV.In the Decree the Minister set out that he had concluded that the stability of the financial system had been placed at serious and imminent risk by the situation in which SNS REAAL found itself prior to 1 February 2013.
All shares, Stichting securities and subordinated bonds were expropriated for the benefit of the Dutch State (the State). The expropriation of subordinated private debts was effected by expropriating the corresponding debts relating to liability capital components of SNS REAAL NV and SNS Bank NV for the benefit of Stichting Afwikkeling Onderhandse Schulden SNS REAAL (Private Debt Settlement Foundation SNS REAAL, ‘Stichting AOS’). In the Decree, the Minister explained that the capital components of the subordinated private debts had been expropriated in the name of a separate foundation in order to avoid these debts being transferred to the State. Through a provision under Article 6:1 of the Financial Supervision Act, SNS REAAL has been appointed as sole director of Stichting AOS. The Decree came into effect at 08.30 a.m. on 1 February 2013. At that moment, the expropriated securities and capital components were legally transferred to the State and Stichting AOS respectively.
Following the expropriation of the shares, Stichting securities, subordinated bonds and subordinated private debts, the following measures were taken in line with the Minister’s nationalisation decree in 2013:
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A paid-in share premium of € 2.2 billion by the State in SNS REAAL NV, € 1.9 billion of which was passed through as share premium to SNS Bank NV.•
The conversion of B shares of SNS REAAL NV into ordinary shares.•
The conversion of the core Tier 1 capital securities issued to the State and Stichting Beheer SNS REAAL into share premium on ordinary SNS REAAL NV shares.•
The expropriated subordinated bonds of SNS REAAL NV and SNS Bank NV were injected by the State as share premium capital into SNS REAAL NV. As a result of this measure, € 698 million (net of tax) of third-party debt was converted into SNS Bank NV's shareholders' equity.•
The expropriated subordinated private debts of SNS REAAL NV and SNS Bank NV were expropriated in the name of Stichting AOS. As a result of this measure, € 9 million was incorporated into capital through SNS Bank NV's profit and loss.•
A bridge loan to SNS REAAL NV of € 1.1 billion.•
The shares in Property Finance were transferred on 31 December 2013 to an asset management organisation in combination with a State guarantee on the temporary loan that is provided by SNS Bank NV to this asset management organisation. Following the transfer, the State injected € 0.5 billion in Property Finance.•
As a result of the transfer of the activities of Property Finance to an asset management organisation and in combination with the State guarantee on the loan, SNS Bank NV released around € 4.5 billion in risk-weighted assets.•
Property Finance was transferred at a transfer value as determined by the Minister, which resulted in a devaluation of the real estate financing portfolio of € 2.8 billion compared to the book value as at 30 June 2012.period nor any severance pay. The vice chairman of the Supervisory Board, Piero Overmars, temporarily acted as chairman of the Supervisory Board until he stepped down on 1 November 2013.
On 4 February 2013, the following Executive Board members of SNS REAAL were nominated and appointed by the State: Gerard van Olphen as chairman of the Executive Board and Maurice Oostendorp as CFRO and member of the Executive Board.
On 1 November 2013, Piero Overmars, Jaap Lagerweij, Robert Jan van de Kraats and Herna Verhagen resigned from the Supervisory Board of SNS REAAL NV. At the Extraordinary General Meeting of Shareholders held on 18 October 2013 it was decided to reduce the number of Supervisory Board members of SNS REAAL NV per this date to seven members. With effect from 1 November 2013, Jan Nooitgedagt, Jan van Rutte and Monika Milz were appointed as Supervisory Board members to the ensuing three remaining vacancies on the Supervisory Board. Mr Nooitgedagt was also appointed Chairman of the Supervisory Board. The new members were also appointed to the Supervisory Board of SNS Bank NV, SRLEV NV and REAAL NV. Mrs Milz was appointed in accordance with the reinforced right of
recommendation of the Central Works Council. Role NLFI in governance structure
Since 31 December 2013, Stichting administratiekantoor beheer financiële instellingen (NL Financial Investments, ‘NLFI’) holds 100% of the shares in SNS REAAL NV. NLFI is responsible for the management of the shares and the exercise of all rights associated with the shares, including voting rights, in accordance with the law and the articles of association of NLFI. Despite possessing all voting rights attached to the shares, in accordance with the law and the articles of
association of NLFI all significant and fundamental decisions must first be approved by the Minister.
Based upon the law and the articles of association of NLFI, NLFI does not possess the right to dispose of nor encumber the shares; these rights can only be obtained after receipt of formal authorisation from the Minister.
The following sections set out specific legal aspects of the nationalisation, procedures and investigations.
16.2.1.1 Council of State
A considerable number of stakeholders lodged appeals against the Decree with the Administrative Jurisdiction Division of the Dutch Council of State. On 25 February 2013, the Council of State decided that the appeals largely do not have a legal base and therefore upheld the expropriation decree. The Council of State judged that the Minister has expropriated the securities and assets lawfully but not the corresponding liabilities or obligations of SNS REAAL NV and
SNS Bank NV towards expropriated parties insofar as these obligations or liabilities are related to the (former) ownership of the securities referred to. Therefore, any such claims can still be made against SNS REAAL NV and/or SNS Bank NV respectively.
A number of stakeholders have referred the appeal procedure at the Council of State to the European Court of Human Rights (ECHR) for review.
16.2.1.2 Enterprise Chamber
The holders of the securities and capital components, as mentioned above, by law have a right to compensation by the State at the level of the actual value of the affected enterprise at the time of the expropriation. The level of compensation is to be established by the Enterprise Chamber of the Amsterdam Court of Appeal. The Minister’s current offer is a compensation of € 0, against which various holders have lodged an appeal at the Enterprise Chamber. On 11 July 2013, the Enterprise Chamber issued an interim ruling and appointed experts to assess the value of the expropriated securities and capital components. On 9 October 2013, the State lodged an appeal against this ruling. It did so also because this was the first time that the Intervention Act had been applied and the State attaches importance to the Supreme Court’s ruling on how certain aspects of the law should be interpreted before the assessment by experts, as recommended by the Enterprise Chamber, gets underway. At the request of the State, the Enterprise Chamber has postponed the
16.2.1.3 Private debt settlement Foundation SNS REAAL
In his Decree, the Minister explained that the capital components of the subordinated private debts were expropriated for the benefit of a separate foundation, Stichting AOS, in order to avoid these debts being transferred to the State. Since Stichting AOS was not provided with any assets, either on incorporation or thereafter, it has not been able to meet its obligations assigned to it under the Decree, resulting from the private loans issued to SNS REAAL NV and SNS Bank NV at the time.
In his Decree, the Minister appointed SNS REAAL NV as director of Stichting AOS. Stichting AOS was incorporated by and for the State to arrange the legal settlement of (the expropriation of) private subordinated debt and not with the purpose to carry out activities for SNS REAAL.
On 12 November 2013, at the request of one of the lenders, the District Court for the Central Netherlands declared Stichting AOS bankrupt. The trustee in bankruptcy is considering the procedure for settling this bankruptcy as well as the roles of the State and director SNS REAAL NV.
16.2.1.4 Participation certificates
Among the subordinated bonds of SNS Bank NV expropriated by the State are so-called third series participation certificates (€ 57 million). Shortly after the nationalisation, the Minister requested management to conduct a fact-finding investigation to ascertain whether there had been any irregularities in the offer of and/or advice concerning these certificates in the past and, if required, to draw up a proposal for compensating those affected. Based on the
investigation performed, SNS Bank NV made a proposal for compensation to the clients in question on 11 July 2013. At the time of publication of this annual report, 97% of the clients had accepted SNS Bank NV's offer. From the total provision of € 53 million, which was recognised for the payment of the compensation in the first half of 2013, the amount of € 51.3 million was paid out in the course of 2013.
16.2.1.5 Other legal procedures and investigations
General
Various former holders of expropriated securities and capital components have initiated legal proceedings to seek compensation for damages. At the time of drawing up the financial statements, no court proceedings had (yet) been initiated against SNS REAAL NV and/or SNS Bank NV other than those stated below. Currently, it is not possible to make an estimate of the probability that possible legal proceedings of original holders or other parties affected by the nationalisation may result in liability, or the level of the financial impact on SNS REAAL NV and/or SNS Bank NV. For this reason, at year-end 2013 no provisions have been made in respect of possible legal actions by holders concerning the expropriated securities and capital components and other affected parties. As the outcomes of possible legal
proceedings cannot be predicted with certainty, it is not possible to rule out that a negative outcome may have a material negative financial impact on the capital position, results and/or cash flows of SNS REAAL NV and/or SNS Bank NV.