Breaking up

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: If Iceland is the place that has suffered most from the banking crisis, the Benelux countries can make a justifiable claim to second place. After the calamitous sale of ABN AMRO and the subsequent dismemberment of Fortis, ING, the biggest bank in the Netherlands, announced on Monday October 26 that it was splitting itself up. The bank will sell its insurance businesses, divest the American arm of its ING Direct online-banking unit and carve out some bits of its Dutch retail activities. By the time the restructuring is done, in 2013, the bank’s balance sheet will be 45% smaller than it was in September 2008.

That isn’t all. The bank also announced plans for a euro 7.5 billion ($11.2 billion) rights issue to help repay half the money that the Dutch government injected into ING in October last year. Investors reacted with dismay to the prospect of dilution and the uncertainty of the planned restructuring, sending the bank’s shares down sharply on Monday.

Other equity investors were spooked, too, as they digested the wider implications of the announcement. For shareholders in other banks that have received state aid, the biggest concerns surrounded the European Commission’s role in ING’s break-up. The Dutch bank has its own reasons to act. The rights issue can largely be explained by ING’s desire to start escaping government investment. The break-up is consistent with a “back to basics” plan announced in April by Jan Hommen, ING’s chief executive, that promised to simplify and shrink the institution. Splitting banking and insurance should rid ING of a conglomerate discount. Its shares have historically traded at a 30% discount to bank and insurance indices.