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06/10/2008Dutch change terms of Fortis bailout

The Benelux countries break up troubled Fortis, and the Netherlands buys all Dutch Fortis banks for EUR 16.8B.

6 October 2008

AMSTERDAM -- The Dutch, Belgian and Luxembourg governments agreed to break up troubled bank Fortis, the bank confirmed in a statement on Friday evening.

The Dutch government bought the bank's financial and insurance operations in the Netherlands for EUR 16.8 billion, the bank confirmed in a statement.

"After this transaction, Fortis Group entails Fortis Insurance Belgium, Fortis Insurance International and the banking activities excluding Fortis Bank Nederland (Holding)", the statement said.

The agreement between the governments of the three countries splits Fortis into separate Dutch and Luxembourg-Belgian businesses.

On Sunday, the governments of Belgium, Luxembourg and the Netherlands nationalised 49 percent of Fortis.

The Dutch government then took over 49 per cent of all Fortis activities in the Netherlands, paying EUR 4 billion.

The new deal involves a takeover of all Fortis activities in the Netherlands.

Also, Sunday's planned sale of Dutch ABN Amro bank, taken over by Fortis in 2007 but still operating independently within Fortis NV until late 2009, was cancelled.

Instead, Dutch central bank (DNB) president Nout Wellink said the integration of ABN Amro and Fortis, as planned following the merger of the two in 2007, would continue.

"The integration will only be easier and more efficient now that the company has become less complicated", Wellink said, adding that the full integration would create EUR 1 billion per year, money that will help the troubled bank.

Rather than ABN Amro merging into Fortis, it is now expected that Fortis will merge within ABN Amro, still the bigger of the two banks in the Netherlands.

Fortis and ABN Amro combined employ 45,000 workers, who are now Dutch civil servants.

Speaking at a press conference on Friday, Dutch Prime Minister Jan Peter Balkenende said the new deal was "necessary in order to create stability on the financial markets".

Balkenende said that Fortis was still suffering after 28 September’s partial nationalisation of the bank by the Benelux governments.

Dutch Finance Minister Wouter Bos said it was mostly the Belgian part of Fortis that was suffering from continued problems.

While stability returned to the stock market, several major business clients in Belgium left the bank, Bos said. This meant the bank remained on the brink of collapse.

By taking out the Dutch part of Fortis, this part will be safe from further risks, Bos said.

He added the deal also created money, which could solve the problems of the Belgium Fortis division.

Bos emphasised the full nationalisation of all Fortis activities in the Netherlands was a "temporary" measure, and that Fortis would return to private ownership once stability returns to the markets.

In a response to the new deal, Dutch legislator Paul Tang of the Labour Party said the "new agreement raises questions that need to be answered".

Tang, whose party is the second largest in the ruling coalition, also said it was "incredible the government did not mention negotiations about a new deal were going on in recent days".

Legislator Kees Vendrik of the Green Party, said it "did not generate a lot of confidence that the government finds it necessary to repair an agreement worth billions of euros within a week".

Fortis needed extra funding due to its takeover of Dutch ABN Amro bank in 2007, for which it paid EUR 24 billion.

[Dpa / Expatica]


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