3.5 billion euro capital injection for KBC
The bank and insurance group KBC is to receive the injection courtesy of the Federal Government.
The bank and insurance group KBC is to receive a 3.5 billion euro capital injection courtesy of the Federal Government. Negotiators from KBC and the Federal Government met throughout the weekend to discuss the possibility of public money being used to help restore confidence in KBC’s shares. The cash injection was announced after a cabinet meeting on Monday morning.
Trading in KBC’s shares has continued as normal on the Brussels Euronext Stock Exchange.
The Federal Government and KBC are keen to stress that the extra capital is being put into the bank and insurance group in order to strength its existing capital buffer.
KBC is said to be financially sound and is not in trouble.
The operation is designed to make KBC better able to cope with the greater demands placed on it by current market conditions.
No dividend this year
The situation at KBC is comparable to that of the Dutch bank and insurance group ING which received an injection of capital from the Dutch government last week.
Special securities have been created so that the injection of public cash doesn’t weaken the position of existing shareholders.
KBC has agreed to pay the Belgian Government 8.5% of the value of its investment each year as a dividend paid out to shareholders.
However, as no dividend is to be paid out this year, the state will not recoup any of the funds invested in KBC just yet.
KBC’s board had already announced that no bonuses would be paid out for 2008.
In future, the Belgian state will have two representatives on the board of KBC.
They will take up posts in the audit, remuneration and appointments committees.
KBC currently has no plans to ask the state to act as guarantor for inter-bank loans.
KBC’s boss André Bergen told the VRT that the bank and insurer now has one of the soundest capital bases of any financial services group in Europe.
Mr Bergen stresses that the cash injection will not have any impact on KBC’s corporate strategy or affect the day to day working of the bank.
KBC’s share value fell by just over 8% during Monday morning trading on the Brussels Euronext Stock Exchange.