The European Union's competition watchdog agreed on Monday that ING, which received 10 billion euros ($12.7 billion) of state aid in the 2008 financial crisis, would have until 2015 to repay the remaining 3 billion euros, plus a 50-percent premium.

It also gave the Dutch bank until 2018 to sell or list its insurance and investment management operations, though parts of these assets must be sold earlier. The regulator had originally ruled ING should divest the businesses and repay state funds by the end of 2013 as a condition of approving the aid.

Banks across Europe are selling assets and cutting costs in a bid to recover from the financial crisis and meet tougher new regulations. But many are struggling to strike deals amid a faltering global economy and unsettled financial markets.

Last month Royal Bank of Scotland, also under pressure from European regulators to sell assets, saw a deal to sell 316 UK branches to Spain's Santander collapse.

"This is moderately positive in the sense that they don't have to sell in a weak market," said Tom Muller, an analyst at private bank Theodoor Gilissen, of the extra time won by ING.

"On the other hand it is a bit negative because they won't be paying dividends in the near future due to the state aid repayments," he added.

At 1115 GMT, ING shares were up 2.3 percent at 6.656 euros.

RESTRICTIONS

"With all the priorities that we have, I don't think it is in the interest of shareholders now that we would start paying dividends," ING Chief Executive Jan Hommen said.

"They would like to see that we pay back the state, that we pay back the double leverage," he added, referring to capital used both in the insurance and banking parts of the group.

ING said it would face certain restrictions, such as limiting its ability to make acquisitions, until 2015 or the date at which more than 50 percent of each of its insurance and investment management operations have been divested.

It has already raised several billion euros from the sale of assets including its U.S. and Canadian online banks and some of its Asian insurance operations.

Last month, pan-Asian insurer AIA Group Ltd agreed to buy ING's Malaysian insurance operations for $1.73 billion.

In a separate deal, Hong Kong businessman Richard Li, the younger son of Asia's richest man, agreed to buy ING's Hong Kong, Macau and Thailand insurance units for $2.14 billion.

(Editing by Sara Webb and Mark Potter)

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