Belgian government announces new bailout plan for KBC bank

14th May 2009, Comments 0 comments

The Belgian government on Wednesday announced it would offer KBC bank guarantees for some of its high-risk assets.

BRUSSELS - This is the third time the state has intervened to help the troubled lender.

"The federal government, in agreement with KBC, has drawn up a state guarantee system which offers a solution to the risk linked to CDOs" the government said in a brief statement, referring to high risk assets known as 'collateralised debt obligations'.

The statement, released after a ministerial meeting in Brussels, gave no more information but added that details had to be legally finalised and that more would follow on Thursday morning.

Belgian newspaper De Tijd reported that KBC was preparing to announce several billion euros in new write-downs for CDOs.

The group was also said to have asked the federal and the regional Flemish governments to help it mop up the losses.

KBC, which has already received two injections of taxpayers' money, earlier requested its shares to be suspended from trading on Wednesday after "several wild rumours circulated in the market" the previous day.

The bank said it would not comment on those rumours until it released its first quarter results as scheduled on Thursday morning.

Shares in the group, which have shed 11 percent of their value so far this year despite a broad rebound in bank stocks, closed down 14.52 percent on Tuesday at 19.10 euros.

The group, which has major operations in eastern Europe, got an injection of 3.5 billion euros (4.8 billion dollars) in public cash last October as the financial crisis raged across Europe.

At the end of January, the regional Flemish government provided a further 2.0 billion euros with an option for another 1.5 billion euros.


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