ING's shares fell by 18 per cent in Amsterdam after the bank announced the plan to offload its insurance business, as well as revealing it is planning to an $11 billion rights issue.
The move by ING is an attempt to pay off the state aid it received from the Dutch government to keep it afloat in the midst of the global financial crisis.
News of the announcement hit share prices at other bailed-out banks in Europe, with Lloyds Banking Group shares dropping 7.2 per cent in value, while Royal Bank of Scotland (RBS) fell 5.7 per cent on Monday.
The European Commission is currently reviewing bailouts and has already indicated that Lloyds and RBS may be forced into selling assets and branches after receiving more than $60 billion in taxpayers' money.
Such forced sales would be made as part of the Commission's attempts to ensure that bailed-out banks are not receiving an unfair advantage over their rivals.
ING's restructuring, which is set to be completed by 2013, will leave the firm 30 per cent smaller than it was before it was bailed out with almost $15 billion last year.
Jan Hommen, chief executive officer of ING, said the decision to split up the bank's operations had not been taken lightly but was a necessary step for the organization.
"The widespread demand for greater simplicity, reliability and transparency has made a split the optimal course of action," he said.
Mr Hommen said the financial crisis had diminished the benefits of organizations having a wide portfolio of financial services businesses.
Next month, ING is set to hold an extraordinary general meeting in Amsterdam to discuss the move.
By Tony Aynsley