BRUSSELS: The global financial crisis took a toll on Europe yesterday, with top officials scrambling to save Fortis bank and Britain reportedly planning to nationalize mortgage lender Bradford & Bingley.
As US lawmakers hailed a breakthrough in talks on a $700-billion bailout, high-ranking European officials raced to hammer out a plan aimed at keeping Fortis from becoming another victim of the crisis.
Shares in the Belgian-Dutch banking and insurance group lost more than a third of their value in the last two weeks amid market concerns over its solvency and its ability to raise funds to absorb its acquisition of former Dutch rival ABN Amro.
The plight of Fortis, Belgium’s leading bank and the second biggest in the Netherlands with 85,000 employees, led to high-level talks in a bid to rescue it amid fears that its collapse could lead to a chain reaction in Europe.
European Central Bank President Jean-Claude Trichet met Belgian Prime Minister Yves Leterme to discuss possible solutions for the company, a spokesman for Leterme said.
Trichet was also among those participating in a Belgian government meeting yesterday evening, along with Dutch Finance Minister Wouter Bos and Nout Wellink, president of the Netherlands Central Bank, according to Dutch and Belgian sources. “I have had an enormous amount of contacts with, for example, my colleagues from Luxembourg, the Netherlands and France... to look precisely at the situation — what are also the difficulties in other countries,” Belgian Finance Minister Didier Reynders told RTL-TVI television.
France currently holds the rotating presidency of the European Union, while Jean-Claude Juncker of Luxembourg is chairman of euro zone finance ministers. French newspaper Le Figaro reported meanwhile that BNP Paribas could be set to take over Fortis, saying that “secret negotiations that have continued over the weekend could culminate in the coming hours.”
Belgian media had reported earlier that BNP, the French banking and insurance giant, and Dutch rival ING had emerged as the most serious potential buyers of Fortis but were demanding state guarantees.
Officials in Amsterdam and Brussels had held crisis talks late Saturday and yesterday on the firm, whose shares have been hammered by liquidity concerns. The talks to rescue Fortis came as media reports said British bank Bradford & Bingley will be nationalized soon.
The BBC website, which did not cite its source, said an announcement was due later yesterday and added that parts of Bradford & Bingley would be sold almost immediately to another bank or banks.
Bradford & Bingley stock has slumped in recent weeks amid fears it could become another Northern Rock, which was nationalized earlier this year after a severe funding crisis and a run on its branches.
The collapse of B&B, which specializes in mortgages for investors buying homes in order to rent them out, would mark the latest casualty in Britain’s banking sector after a deal was agreed for HBOS to be bought by rival Lloyds TSB earlier this month.
Last week, Juncker had urged US authorities to agree quickly a bailout plan for the crisis-struck financial sector. “My hope is that they will do it quickly because, when I look at financial and stock markets, exchange rates and global confidence indicators, the Americans’ hesitation over their intentions deepens uncertainty.”
Top EU officials have also said that Europe does not need a US-style bailout plan for the financial sector, limiting their response to the current crisis to calls for tougher regulation.
In the United States, lawmakers reported a breakthrough on what would be the largest government bailout of struggling financial institutions since the Great Depression of the 1930s.
According to a summary of the draft plan, the deal would release some $350 billion initially and condition future payments on Congressional approval.
