Banking crisis claims Belgo-Dutch giant

LEIGH PHILLIPS

Today @ 09:27 CET

The global banking crisis, born across the Atlantic, again sent waves crashing into Europe on Sunday (29 September) as the Belgian, Dutch and Luxemburg governments partly nationalised Belgo-Dutch banking and insurance giant Fortis in an €11.2 billion bailout.

The move was announced on Sunday evening by Belgian Prime Minister Yves Leterme, following a marathon weekend of talks between the three governments and European Central Bank chair Jean-Claude Trichet.

“We have taken up our responsibility, we did not abandon the savers,” Mr Trichet told reporters.

The deal will see the Benelux governments purchase 49 percent of the bank’s operations in each of the three countries. Belgium is to take on the biggest load, offering €4.7 billion towards the acquisition, with the Netherlands paying €4 billion and Luxembourg €2.5 billion.

The move comes after shares in Fortis plunged sharply in the last two weeks, losing more than a third of their value. Over the past year, shares in the bank – whose assets are many times larger than Belgium’s GDP – have lost some three quarters of their value.

The Belgian and Dutch governments have also said they will guarantee 100 percent the deposits of clients. Normally in the two countries, only an initial €20,000 is guaranteed by the state.

The governments had hoped to avoid any moves towards nationalisation of the bank and were attempting to piece together a purchase of Fortis – or at least part of it – by Dutch bank ING or BNP Paribas in France.

Negotiations broke off with the two banking groups when the Benelux governments refused to accede to demands that they offer guarantees against future losses.

Trouble at mill

Meanwhile in the UK, the government is set to nationalise troubled West Yorkshire-based bank Bradford & Bingley, according to British press reports.

The UK’s finance minister, Alistair Darling, has convinced Spanish bank Santander to purchase some 200 of Bradford & Bingley’s branches and €28 billion (£22 billion) in savings, while the UK government is take over €52 billion (£41 billion) of the bank’s mortgages, according to UK daily the Guardian.

The move significantly expands Santander’s presence in the UK, as it already owns Abbey and is in the process of purchasing Alliance & Leicester.

In Germany, troubles at lender Hypo Real Estate are also the subject of emergency talks between German banks and domestic authorities.

A possible rescue of the Munich-based bank is under consideration, while Reuters – quoting an unnamed source close to the discussions – is reporting that the group has received a credit line of some €35 billion from a consortium of private and public-sector banks in the country.