The Dutch central bank took over DSB last week
A Dutch court has declared DSB bankrupt after last-ditch attempts to find a buyer for the bank failed.
Last week, the country's central bank took over the firm after clients withdrew 600m euros ($896m; £550m) in the first two weeks of October.
The bank had deadline of Monday morning to sell itself to a US bank, but talks broke down over the weekend.
DSB is the first Dutch lender to fail since the government rescued several banks last year.
Many of its 2,000 staff are expected to lose their jobs.
"The court comes to the conclusion that everything possible was done to save the bank, but that there are no prospects of that being achieved," the Amsterdam District Court said.
"For that reason, the court declared DSB bankrupt."
The Dutch government has said that DSB's failure was "not caused by the credit crisis" but by bad management, blaming its policies and unclear communications.
It said it would be launching an independent investigation into what went wrong.
It will look at the conduct of current and former board members, including former finance minister and current ABN Amro chief executive Gerrit Zalm.