ING shares rose 22% to E8.9 in early trading on October 20, after the Dutch government said it would inject E10bn of core Tier-1 securities into the bancassurer. The rise follows a 27% slump on October 17.

The bank will issue 1 billion non-voting securities to the Dutch state at E10 each. The Dutch central bank will classify these as core Tier 1 and they will be ranked the same as ordinary common equity.

ING can buy back the securities at any time by paying E15 for each one, or 150% of the issue price. The bank can convert all or some into ordinary shares on a one-for-one basis in three years, although the Dutch government can then choose to swap its shares for E10bn in cash.

The bank will pay a coupon of 8.5% on the new securities, but only when ING starts paying dividends again. If the dividend is higher than E0.85, the coupon will be 110% of the dividend in 2008, 120% for 2009, and 125% thereafter.

ING’s core Tier 1 ratio will be 8% after the injection of E5bn. A further E2bn will be pumped into ING's insurance business, while E3bn will go to reduce ING Group's debt to equity ratio from 15% to 10%.