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Last Updated: Sunday, 30 September 2007, 14:43 GMT 15:43 UK
ING wins from online bank failure
ING Direct website
ING Direct currently has about $60bn in deposits
Internet bank ING Direct has agreed to take over $1.4bn (687m) of the insured savings deposits of US failed online rival NetBank.

The figure is about half the amount NetBank had in deposit in June, according to the Federal Deposit Insurance Corporation (FDIC).

The transaction comes after the parent firm of the US internet savings-and loan group filed for bankruptcy.

NetBank is the latest casualty of the US home loans slump, hurting banks.

Georgia-based NetBank suffered severe losses in 2006 primarily from mortgage defaults, a lack of proper risk controls and fewer home loan originations, according to a bankruptcy court filing.

People are basically going from one FDIC-insured bank to another
Arkadi Kuhlmann, chief executive of ING Direct

Its collapse is the largest in the US in the banking sector since 1993.

It follows the rescue of British mortgage lender Northern Rock earlier in September by the Bank of England after the UK bank could not access affordable finance to fund its business.

This prompted a run on the lender despite protestations from the company that it was solvent, which was only quelled after a government guarantee reassure Northern Rock savers.

The American Bankers Association (ABA) moved quickly to curb a similar loss of confidence in the US banking system by reminding consumers that the "FDIC insurance fund is huge".

"The expected (NetBank) losses only amount to two-tenths of 1% of the fund," an ABA spokesman said.

Normal access

The FDIC, a scheme set up to offer compensation to US savers, said NetBank clients with insured deposits would simply have their accounts transferred to ING, which they would be able to access normally using online services on Sunday evening.

Over the weekend, customers have been able to access their money by writing cheques, using teller machines or their debit cards.

"People are basically going from one FDIC-insured bank to another," said Arkadi Kuhlmann, chief executive of ING Direct.

He said the transaction would add 110,000 new customers to ING Bank's existing six million clients in an interview with Reuters news wire agency.

As part of the transaction, ING will also acquire $724m of assets from NetBank, which was founded in 1996 and had boasted $4.8bn in deposits and assets two years ago before the growth of national and regional internet lenders eroded its profit margins.

ING Bank has about $60bn in deposits.

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