LONDON (MarketWatch) -- Citing pressure from the European Commission's antitrust enforcers, ING on Monday announced a sweeping plan to break itself apart as well as to repay some of the state aid that Holland has provided.

ING ING, +0.14% (INGA) said it will divest the units that comprise its insurance arm by sale or initial public offering over the next four years.

"Splitting the company is not a decision we took lightly," Chief Executive Jan Hommen said, noting the scale, capital efficiency and earnings stability benefits from the existing structure. But demands for greater transparency, simplicity and reliability took greater priority.

The moves will end up reducing ING's balance sheet by 600 billion euros when compared with Sept. 30, 2008 levels, a drop of 45%.

The E.C. also required Germany's Commerzbank (CBK) to reduce its size and the Royal Bank of Scotland (RBS) and Lloyds Banking Group (LLOY) may be formally told to sell off assets after receiving state aid.

Lloyds on Monday announced the sale of a relatively small unit as reports grow that the U.K. bank is on the verge of a multi-billion-dollar rights issue.

Jan Hommen, Chief Executive Officer of ING Reuters

ING's Hommen, during a conference call, repeatedly stressed that the sale of different divisions won't be done at fire-sale prices, pointing to other assets the Dutch lender has already disposed.

ING shares dropped around 3% at the start of the day, but later in the session, ING shares dropped 9.7% to 10.53 euros. U.S. shares also nursed double-digit-percentage falls in early action.

"While a deal does reduce the uncertainty and the third-quarter results look solid, an immediate capital raising of 7.5 billion euros, 2 billion euros more than we had calculated, and more radical surgery on the ongoing business mean our target price is under review," said Keefe, Bruyette & Woods analyst Christopher Hitchings in a note.

It would have been "much more complicated to split off the bank," Hommen added, and just hiving off ING into separate insurance and banking arms wouldn't generate proceeds to repay the Dutch government.

ING separately announced a 7.5 billion euro rights issue -- the issue of discounted shares to existing holders -- as it said it will repay 5 billion euros, or half, of state aid it's received.

It's going to take a 1.3 billion euro fourth-quarter charge, to account for the risk transfer the Dutch government absorbed in guaranteeing its portfolio of Alt-A mortgages.

ING will pay a premium between 333 million and 691 million euros to the Dutch state depending on whether its stock price is above 11.16 euros. That premium of 12% to 19% is steeper than the 10% Aegon (AGN) was assessed.

ING also put its ING Direct USA unit on the block but said it's not likely to sell that unit until the end of 2013. Selling the unit was a stipulation of the E.C. regulators. Hommen declined to characterize the back-and-forth negotiations with the regulators during the analyst call.

The European regulators also required ING not to be a price leader in retail and small- to medium-sized business banking until all the Dutch aid has been repaid.

ING also reported preliminary third-quarter results, expecting a 500 million euro profit for the third quarter after divestments and special items.

Excluding those, its profit climbed to 750 million euros from 229 million euros.

It took write-downs of 850 million euros on its portfolio of investments on debt and real estate investments, including 550 million euros on Alt-A residential mortgage-backed securities.