The Dutch Government announced last night that it would inject €10 billion (£7.8 billion) of fresh capital into ING, the Dutch savings bank with more than a million British customers.

The details of the deal, which was agreed over the weekend, were announced last night by Wouter Bos, the Finance Minister, Nout Wellink, the central bank governor, and Michel Tilmant, the chief executive of ING.

The Government will buy €10 billion of subordinated bonds in ING using a €20 billion fund set aside for fighting the current crisis. The deal could leave the state with as much as an 8.5 per cent stake in the Netherlands’ largest bank and it will have two of the 12 seats on its supervisory board.

Unlike rescued UK banks, ING will be free to pay dividends while it owes money to the Dutch Government. However, the bank said it was scrapping its final dividend for 2008 and executive bonuses because of the “exceptional circumstances”.

The bonds are redeemable at any time at 150 per cent of the issue price and carry no voting rights. The capital injection will boost ING’s core Tier 1 ratio, a measure of financial strength, from 6.5 per cent to 8 per cent.

Mr Bos said the deal was structured to ensure a state exit as soon as “this financial hurricane” receded. “This is a healthy company,” he said. “We wanted to be able to give it extra buffers to withstand market conditions in these extraordinary times.”

Mr Tilmant said the bank had the trust of its customers and had not seen a large outflow of funds. “The market environment has changed over the last two weeks and the expectations for capital levels have changed following massive capital injections in financial institutions worldwide,” he said.

The move follows ING’s revelation after trading on Friday that it expected a €500 million net loss in the third quarter. Its shares had already plumetted 27.5 per cent to a 13-year low on rumours that it was short of capital.

ING has 85 million customers and 130,000 staff around the world.

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