AMSTERDAM (Reuters) - ING became the latest European bank to seek government funding on Sunday, agreeing to a 10 billion euro ($13.5 billion) cash injection as well as scrapping executive bonuses and its year-end dividend.

A man cleans the windows of a ING branch in central Madrid April 14, 2008. REUTERS/Andrea Comas

Following a weekend of intense negotiations after seeing its share price sliced by over a quarter in the latest trading session and the partial nationalization of rival Fortis two weeks ago, ING sought help to shore up its core capital and restore investor confidence.

As governments around the world pour in billions of dollars of state cash to help stabilize their banks, the Dutch government has set aside 20 billion euros to pump capital into its financial institutions. Several British and Swiss banks tapped similar government funding lifelines in the past week.

Most of the smaller listed Dutch financial companies have indicated that they did not plan to ask for capital support, but ING and insurer Aegon had only said they were looking at the government offer.

“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,” ING Chief Executive Michel Tilmant said.

“We have accepted the consequences of this situation and welcome the support of the Dutch state,” he told an evening news conference, flanked by Dutch Finance Minister Wouter Bos and central bank president Nout Wellink.

SOUND FINANCES

Bos and Wellink sought to reassure customers and shareholders that ING was a well-run firm with sound finances.

“This is not about saving bad companies but to secure the future of a healthy one,” Wellink said.

ING has a market value of 15.3 billion euros based on Friday’s closing price, when its shares slumped 27.5 percent after it said it will book its first-ever loss in the third quarter as it was hit by the credit crisis.

The Netherlands’ biggest listed bank said the transaction will raise the core capital ratio of its banking operations, boost the balance sheet of its insurance business and reduce the debt-to-equity ratio of the group.

The bank had the trust of its customers and had not seen any meaningful outflow of funds, Tilmant said.

ING will issue 10 billion euros worth of securities to the Dutch state, which will have a position similar to common shareholders. The transaction is designed not to dilute shareholder capital.

But with a coupon of at least 8.5 percent and the right to buy back the securities at any time at 150 percent of the issue price or convert them into ordinary shares, ING will have a strong incentive to pay back the government.

Together with the 16.8 billion euros for the partial nationalization of Fortis, the Dutch government has now spent nearly 5 percent of the country’s gross domestic product to help banks.

The capital injection will raise ING’s core tier 1 capital ratio to 8 percent, well above the industry-recommended 6 percent target, and reduce the group’s debt to equity ratio to 10 percent from 15 percent.

The capital injection deal, which includes the state naming two supervisory board members, is due to be completed by November 12, when ING reports quarterly results.

ING, faced with a rapidly falling share price, gave some details of its third quarter on Friday, expecting a net loss of about 500 million euros, its first quarterly loss since the group was formed in 1991. That sent its shares to a 13-year low.

ING’s results had initially proven to be more resilient through the credit crisis than many of its peers, such as Belgian-Dutch rival Fortis, which was broken up earlier this month, partly nationalized by the Dutch government and partly sold off to French rival BNP Paribas.