Unlike what the finance minister wants us to believe, the fall of DSB has everything to do with the banking crisis.

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The Netherlands has lost another bank. After the bankruptcy of Van der Hoop in 2005 and the perils surrounding ABN Amro, which will probably be merged with Fortis Bank Netherlands, DSB Bank went down on Monday. If the liquidation of Van der Hoop preceded the credit crisis and can be seen as detached from it, this is not the case for DSB.

Finance Minister Wouter Bos, however, has all the reason to say there is no connection. A calamity like this is the last thing he needs at a time when the rumpus in and around the banking industry seemed to have calmed down. But Bos is wrong to suggest DSB is an isolated case that would have gone wrong under any other circumstances.

Damaged confidence
First of all the call for a run on the bank found such fertile ground because public confidence in the banking sector has been severely damaged in the past two years.

On top of that DSB was unable to compensate the withdrawn savings by lending on the international money market. This market has somewhat defrosted since last year's ice age, but it is still not easily accessible for banks with a record, let alone a bank facing an immediate exodus. It is because of this that DSB's liquid assets dried up as quickly as they did.

DSB's liquidity was already weak because of the credit crisis, as it still is at most banks. DSB had signed up for the special facilities the European Central Bank and its affiliated national central banks have made available since the start of the credit crisis. The Dutch Central Bank's attempt to rescue DSB by selling parts of it to bigger Dutch banks failed mostly because those banks feared possible damage to their reputation – not just with the public but also on the financial markets – because of DSB's controversial lending practices and pending claims by customers who feel they were duped by the bank.

Banking trouble microcosm
So unlike what the finance minister wants us to believe, the fall of DSB has everything to do with the banking crisis. As do the practices that got DSB into trouble in the first place.

Operating on and sometimes over the boundaries of ethical behaviour became DSB's core business. Selling customers exorbitant products they could not comprehend contributed to the current crisis in banking. Loans dressed up as investments and usurious single-premium insurance policies fall in the same category as complex financial derivatives that banks and investors fooled themselves with for years. Innovation driven over the edge, irresponsible profit seeking and supervisors falling behind; DSB is the microcosm of all that is wrong in the financial industry.

It must be tempting to file the collapse of this bank as an incident, or maybe a final convulsion of the credit crisis. But if last week's events prove anything it is that the crisis in banking is far from over.