The one advantage banks have over other companies when they are in trouble is there is one last friend to turn to: the central bank. But the DSB collapse shows that friend can sometimes turn into a tough adversary.

Over the last couple of weeks the Dutch central bank (De Nederlandsche Bank) was one of, if not the last lender to have any confidence in the DSB Bank. When savers withdrew some 670 million euros from the bank in a matter of days, it was the national and European central banks who made sure the money was there to be transferred.

After the credit crisis erupted last year the short-term inter-bank lending market all but dried up. Central banks stepped in to keep money flowing. But banks are only entitled to that service if they are able to put up collateral as a guarantee that the money will be returned.

DSB board member Hans van Goor this week said DSB put up 2.5 billion euros worth of collateral with the central bank in order to obtain 1.8 billion euros. But as savers were pulling out in response to a call from a foundation for duped customers, the central bank lowered the amount DSB was allowed to borrow. On October 5 it realised DSB had put up as collateral the very loans that were at the heart of the bank's problems, and that these loans were no longer worth what the bank claimed they were.

The ultimate lifeline

The subsequent predicament put DSB in a position where it slowly lost control and had no choice but to give in to the demands of those who might still be able to rescue it: the central bank, a consortium of bigger banks (Rabobank, ABN Amro, ING, Fortis and SNS), who were considering a joint rescue operation, and finance minister Wouter Bos, who had to decide on a possible government bailout.

Pending a decision by the consortium, the central bank put up 100 million euros in emergency credit. This money had to be repaid by Wednesday at the latest, but it is unclear if this has actually happened.

Emergency credit is the ultimate lifeline for banks on the verge of collapse. The British mortgage bank Northern Rock received one when savers lined up in the streets to take out their money in 2007. The Belgian and Dutch central banks respectively gave 50 and 7 billion euros to Fortis for similar reasons little over a year ago.

When Fortis was on the brink of bankruptcy, however, the Belgian central bank did the exact opposite of what the Dutch counterpart did with DSB: the Belgians gave Fortis more than what the bank had put up as collateral.

The emergency credit and the disappearing savings illustrate how DSB was under intense and eventually daily control of the supervisors long before this was made official on Monday.

Lost control over his life's work

In order to reassure customers, the central bank put out a statement on October 1, saying DSB was safe. The press release was all the more surprising given that central bank president Nout Wellink - after many Dutch savers lost money in the Icelandic Landsbanki and Icesave bankruptcy last year - announced in the future the supervisor would paint a more realistic picture. "We have to get accross that supervision is no guarantee," he said at the time.

But as more savers withdrew their money from DSB and the risks grew, no emergency statements stressing how savings up to 100,000 euros were guaranteed were made by either the central bank or the ministry. Meanwhile the five major banks pulled out because they feared claims from disgruntled DSB customers. A central bank take-over now seemed the only remaining solution. But that proved unacceptable for owner Dirk Scheringa, who founded the bank in 1975.

The banker and the central bank were now completely at odds with each other, as is usually the end result when a bank or insurance company is in agony. The central bank typically offers just one way out - take it or leave it.

After the initial rescue operation for Fortis failed the Dutch government nationalised the Dutch parts of Fortis, including ABN Amro, within a matter of days. When the small life insurer Robein Leven had insufficient buffers late last year, the central bank argued in favour of a capital injection. When that failed, founder Reintjes lost control over his company and the insurer was taken over by F. van Lanschot Bankers.

The same is now happening to Scheringa and his DSB Bank. In the end, Scheringa's last friend became his worst enemy, and in the process, he slowly lost control over his life's work.