Governments around Europe were forced to rescue a number of financial institutions hit by the fallout from the ongoing US credit crisis, while a US
Governments around Europe were forced to rescue a number of financial institutions hit by the fallout from the ongoing US credit crisis, while a USD700 billion bank bailout was rejected in Washington.
Germany, Europe’s largest economy, had to inject emergency funds into mortgage lender Hypo Real Estate, which was on the brink of collapse prior to the rescue package.
The total sum of the bailout was not disclosed, but the German Finance Ministry said its credit line to the lender was worth 35 billion euros.
In Britain, the government nationalised the loans and mortgage business of the country’s eighth-biggest mortgage lender, Bradford & Bingley, and is organising the sale of B&B’s savings business to Abbey/Santander.
The UK Treasury said: “Following recent turbulence in global financial markets, Bradford & Bingley has found itself under increasing pressure as investors and lenders lost confidence in its ability to carry on as an independent institution.”
On the continent, Benelux banking and insurance company Fortis had to be propped up by a EUR 11.2 billion-euro package funded by the three Benelux countries, Belgium, the Netherlands and Luxemburg.
Dexia became the second Belgian bank this week to secure a government and shareholder bailout today when Belgium, France and Luxembourg said they would inject almost EUR 6.4 billion (USD9.24 billion) to keep the business afloat.
Dexia is a French-Belgian specialist in lending to local governments that ran up huge losses in its U.S. operations.
In a bid to avert further stock market turbulence, the Benelux governments had to step in to rescue Fortis, which was the Royal Bank of Scotland’s partner for the takeover of ABN Amro.
The group paid GBP 19 billion for its share of ABN, which was sold for nearly GBP 50 billion last year at the height of the market, just before the credit crunch struck.
On Friday, Fortis shares dropped 20 per cent, to hit their lowest level in 15 years. It is said to have struggled to meet the cost of integrating ABN’s assets, reportedly facing a shortfall of around GBP 4 billion.
Fortis, which employs 85,000 staff, will sell the parts of Dutch bank ABN Amro it bought last year to Dutch rival ING in a deal expected to be finalised within two weeks, sources have said.
Dutch Finance Minister Wouter Bos said: “We could have not intervened, but the question was whether Fortis would have survived on Monday.”
The storm in the world financial markets also hit Iceland yesterday, forcing its government to take control of Glitnir as depositors fled the country’s third-largest bank.
David Oddson, Iceland’s Central Bank Governor, said: “Without this intervention, Glitnir would have ceased to exist within the next few weeks. It’s as simple as that.”
Iceland’s government has agreed to take a 75 per cent shareholding, injecting EUR 600 million (HNP478 million) into the bank.
The rescue package was agreed late on Sunday after talks between Glitnir, the Icelandic Central Bank and the Government. Glitnir’s ability to source funds in the capital markets dried up last week and it was forced to seek state funds.
In France, President Nicolas Sarkozy said he will meet with the chief executives of leading French banks and insurance companies to discuss the global financial crisis today.
The meeting at the Elysee presidential palace is to “review the situation of financial institutions and the credit level of households and businesses,” said a statement from the presidency on Monday.
Sarkozy warned in a major address last week that France would not be spared from the turmoil unleashed by the US banking crisis.