This is the conclusion of three researchers hired by the Enterprise Chamber in Amsterdam in a case of mismanagement at SNS Reaal. Frans Cremers, Daniël Stibbe and Machiel Jansen Schoonhoven investigated the question of whether the directors and supervisory directors of SNS Reaal were aware of the risks when they took over real estate bank Bouwfonds Property Finance from ABN Amro in 2006. It was also examined whether the problems had been recognized and addressed in a timely manner after the takeover.
It is clear from the 480-page final report that SNS Reaal had oversized itself with the acquisition of Property Finance. While the global ABN Amro could still bear the risks of an internationally operating real estate bank, SNS Bank as a simple savings, mortgage and SME bank was far too small for this. In addition, SNS’s capital buffers were far too closely linked to those of insurer Reaal.
It was clear to the top of SNS Reaal that there were risks associated with the takeover, the researchers concluded. In light of the growth ambitions and the then unforeseen credit crisis, it was not foreseen that it could ever happen. Risk management problems at Property Finance would gradually be resolved. “Apparently reliance was placed on past successes and on the relationship,” the researchers said.
However, disaster struck when the global economy collapsed due to problems with US junk mortgages. At the same time, new, stricter banking rules also loomed: “Property Finance, purchased as a growth brilliance and to diversify, lost its luster for a short period in the course of 2008, early 2009 and turned into a millstone that had to be hardened time and again. intervened, often running behind the facts.”
The three researchers ‘do not doubt that if Property Finance had not been bought at the time, it would not have been nationalised’. SNS Reaal would have run into problems as a result of the credit crisis, but according to the researchers ‘at most, less great’.
Whether things could and possibly should have been done differently, the researchers find it up to the judge to assess that. The faults in SNS Reaal’s internal control are found to be culpable. This also applies to the willingness to (continue to) grant loans to financially weak relations, such as Lips, Foruminvest, Modulus, TCN and Oceanis, often in combination with high advance rates and the credit files that were not always in order’ at Property Finance. In addition, the reporting in the annual reports was not always correct and price-sensitive information was withheld, according to the report.
The researchers do emphasize that in their conversations with the former executives and supervisory directors they ‘certainly did not get the idea that the top of SNS Reaal et al. did not want to take up matters or deliberately left them behind or did not do so’: „On the contrary. In none of the interviewed former executives and supervisory directors do researchers feel that they have not acted with integrity and that they have tried to tackle problems to the best of their knowledge and ability.”
In response to the investigation, SNS Reaal and former CEO Rien Hinssen indicated that the three researchers pay too little attention to the successes achieved by Property Finance until mid-2008 and the rising and growing market in which Property Finance operated before the credit crisis. According to Hinssen, the business model consisted of ‘acquiring real estate and development projects, adding value, revaluing and then turning the added value into cash through refinancing.’ The credit crisis and the real estate crisis would have put this business model out of action.
A few years ago, the Enterprise Chamber launched an investigation into possible mismanagement at SNS Reaal, which was nationalized in 2013. In the worst case, the directors at the time could be held personally liable by aggrieved shareholders and other creditors.
For example, the Association of Effects Owners (VEB) is demanding compensation because investors lost their shares due to the nationalization.
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Researchers: mistakes at SNS Reaal, but top acted ‘integrity’ | Financial
Source link Researchers: mistakes at SNS Reaal, but top acted ‘integrity’ | Financial