UPDATE 2-EU blocks ING call for early debt redemption

* EU blocks early repayment of hybrid

* EU says state aid needs to be repaid first

* ING reiterates aims to repay state before end-2011

* ING share down 2.4 percent

(Adds share price, AXA move)

AMSTERDAM, Nov 30 (BestGrowthStock) – The European Commission has
rejected a request by Dutch bank ING (ING.AS: ) to repay a $1.5
billion debt instrument because the financial group has not yet
repaid its state aid.

ING had wanted to call the instrument (44978NAA3=: ) on Dec.
31 as the hybrid will not qualify as Tier I capital under Basel
III solvency rules.

“ING cannot repay its private hybrid capital holders until
it has repaid the capital it received from the Dutch State in
full. This is to ensure a fair distribution of the rescue burden
in the first place,” said Joaquin Almunia, Commission
vice-president in charge of competition policy.

ING shares were down 2.23 percent at 6.8380 at 1042 GMT with
SNS analysts calling the EU rejection and a separatge legal
action by french insurer AXA “disappointing”.

A unit of AXA (AXAF.PA: ) has sued an arm of ING in New York
state court, alleging ING misrepresented the financial health of
a Mexican insurance company it sold to AXA in 2008.

ING received a 10 billion euro ($13.15 billion) capital
injection from the Dutch State in October 2008, of which 5
billion euros were repaid a year later.

It also received 12 billion euros in liquidity guarantees.

The Dutch government, at the beginning of 2009, also
provided ING with a back-up facility covering 80 percent of a
portfolio of $39 billion in illiquid assets.

“It remains our ambition to repay the state before the end
of next year,” ING spokesman Frans Middendorff said.

“We are not surprised but deplore the (Commission’s)
decision,” he added.

It will now have to pay an interest rate of 3.9 percent on
the 8.439 percent non-cumulative guaranteed trust preferred
securities paper, made up of three-month LIBOR plus 360 basis

ING will be able to call the hybrid loan after repaying the
state or after Nov. 18, 2012.
(Reporting by Marcel Michelson; Editing by Will Waterman)
($1=.7606 Euro)

UPDATE 2-EU blocks ING call for early debt redemption