foodconsumer.org: ING Group:  Breakin’ Up is Hard to Do

ING Group:  Breakin’ Up is Hard to Do
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admin on 10/31/2009 00:11:00
 
By Rachel Stockton
In today’s business climate, the only thing that’s certain is that
nothing’s certain; and as ING Group and other global banking institutions have
learned over the last year, what was once a viable business model may morph into
a fiscal disaster over time.
ING Group, the Dutch financial services company, recently made the announcement
that it will split itself in two and divest itself of its insurance operations,
including its U.S retirement services and annuities headquarters in Windsor.
Jan H.M. Hommen, the president of ING, tells the New York Times that last
year’s government bailout of the company was the “catalyst for
divestiture.”
Prior to the bailout, Hommen maintains that having the banking and insurance
operations under the same umbrella provided earnings stability that resulted
from its richly varied portfolio.
ING began its banking/insurance/investment business model 9 years ago, when it
bought Aetna’s financial services business based in Hartford.  Since that
time, the company has spent millions on marketing the new brand name, which may
change again, once the restructuring has occurred.
ING isn’t the only financial services company feeling the heat of the
recession.  Other finance giants, such as Citigroup, have also taken an immense
hit.  Companies that combine banking, insurance, and investment services began
to crop up on the financial services landscape after the modification of a law
that required the separation of investment banking, insurance and banking
services.  The resulting one-stop-shopping model made sense after the 1990s
change; however, as the economic climate began to shift, many of these companies
began divesting themselves of unprofitable assets as they began to see the
handwriting on the wall.
While many of these financial leviathans have come under intense scrutiny, ING
Group is the first banking institution to be ordered to split up; Citigroup was
mandated to streamline its operations, but so far, its structure remains intact.
This could possibly change; Barney Frank, Chairman of the House Financial
Services Committee is planning on introducing plans that would make it easier
for law makers to step in and take over the reins of failing financial
institutions.  He will also introduce proposals that will allow the government
to split them up, should the government deem it necessary.   Frank’s
announcement sent bank stocks into a tail spin; regardless of whether or not
government intervention would provide stability, the perception among investors
is that these institutions would not be as lucrative, post-regulation (New York
Times).