Fortis rescue plan fails to calm markets

Fortis rescue plan fails to calm markets

2nd October 2008, Comments 0 comments

Fortis rescue plan fails to calm markets

The Benelux rescue plan for the Belgian-Dutch banking group Fortis has failed to calm European financial markets, with the Amsterdam AEX index falling nearly nine percent on Monday, its biggest loss in 21 years. Other European stock exchanges also reported significant losses. In Amsterdam, Fortis shares bounced back briefly, but quickly lost ground again to close down 24 percent.
 
On Sunday, Belgium, the Netherlands and Luxembourg decided to jointly take a 49-percent stake in Fortis. The three countries will pay 11.2 billion euros for their acquisition, the Dutch share amounting to four billion euros.
Fortis Bank will be forced to sell its recent acquisition, the Dutch division of ABN Amro. Fortis' new CEO Filip Dierckx admits that the price paid for ABN Amro was too high. Mr Dierckx said it was strategically the right move, but was far too expensive and at the wrong time.
 
Government prepared to rescue other banks
 
ING Bank, which was said to be interested in taking over ABN Amro but which has now denied the rumours, also took a serious beating on Monday, recording an 18 percent loss at the end of trading. Finance Minister Wouter Bos says the Netherlands will come to the rescue of other banks if necessary.
 
Meanwhile, the free daily De Pers reports on the growing consensus that top salaries in the banking sector will have to be dealt with. The paper says now that the United States, the land of high-flying wages, is planning to curb top money in the banking sector, the Dutch government cannot lag behind. It reports that three of the four largest Dutch political parties agree that high-flyers at Fortis must not be allowed to earn enormous salaries now the firm has been partially nationalised.
The paper quotes Socialist Party (SP) spokesman Ewout Irrgang: " Fortis' top managers have failed. What is good for the United States is also good for this country. I hope the Americans will not prove themselves more left-wing than Wouter  Bos [the Dutch finance minister and Labour Party member]."
 
Coalition support
 
Both the Labour Party and the conservative VVD are said to support the first aim of the SP in stopping top Fortis figures securing massive bonuses on leaving the bank. Mr Irrgang thinks Labour's two coalition partners will also back saying no to bonuses at Fortis.
 
VVD financial spokesman Frans Weekers, despite being against nationalisation in principle, accepts that the partial nationalisation was necessary. De Pers quotes him as saying: "But players leaving the field at a bank like Fortis shouldn't under any circumstances be given a golden handshake. They shouldn't get a single euro cent."
 
2 October 2008 
 
Mike Wilcox
 
Radio Netherlands 

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