Brussels, 29/09/2008 (Agence Europe) - The financial crisis triggered off in summer 2007 is no longer just affecting European banks that massively invested in bad loans linked to US subprime mortgages. This week, the Belgian-Dutch bank Fortis had be saved in an emergency operation carried out by the Belgian, Luxembourg and Dutch authorities, which led to partial nationalisation (49.9%) of its capital (cost of €4.7 billion for Belgium, €4bn for the Netherlands and €2.5bn for Luxembourg). Fortis' assets are valued at €970bn, three times more than Belgian Gross Domestic Product and it is the first pan-European deposit bank suffering the full fall-out of the financial crisis. It is paying dearly for being unable to meet its debt commitments (€24bn) taken on after the buyout of the Dutch ABN Amro bank, which was over-exposed
to bad loans.
The Fortis rescue operation was carried out in concertation with the European Central Bank, the European Commission's competition services and the French Presidency of the EU. The Commission's spokesperson stressed the good collaboration between all these partners in a “very difficult situation” and added a positive take on things by emphasising that “everybody is working hand in hand in close contact…This is testimony to the financial system working and being able to provide an appropriate response”. He pointed out that on Wednesday, the Commission would make proposals to amend European rules on demands for capital requirements for banks (Basel II directive) and set out a European-wide framework for financial ratings agencies (EUROPE 9744).
There was a very real fear of contagion on Monday: the financial markets and especially the value of certain banks, particularly those of the Franco-Belgian bank, Dexia, fell sharply. Other banking rescue operations were being concocted in the United Kingdom (part nationalisation of Bradford and Bingley) and in Germany (credit line of €35bn granted to Hypo Real Estate) which will need, as is the case with Fortis, to be notified to the Commission to see how they comply with European competition rules. The morale of business leaders and consumers has become a little gloomier and business environment and economic confidence indicators for September have fallen to their lowest levels since 2003 and 2001 respectively. (M.B./transl.rh)