The cash deal - expected to close by December, subject to regulatory approval - will bring ING a transaction gain of around EUR1.1 billion after tax and release EUR1.4 billion in capital.

ING launched its direct-only Canadian unit in 1997, building up a business which now has over 1100 employees serving 1.8 million clients and approximately C$40 billion in assets, making it the eighth largest bank in the country.

The Dutch bank - which has already been forced to sell off its US Internet operations as an EC condition of a bailout - has confirmed that is also still looking to offload its UK operations.

Jan Hommen, CEO, ING Group, says: "Scotiabank's straightforward business model combined with the innovative and successful ING Direct model make an ideal combination for a strong future and a solid base for both our customers and employees."

Anatol von Hahn, group head, Canadian Banking, Scotiabank, adds: "Scotiabank is committed to preserving what ING Direct's customers have come to love about it. ING Direct will continue to operate separately and customers will be able to interact the way they do now using their existing account numbers and passwords, served by the same familiar team."