1st Apr 2023

Commission has 'no reason' to question Fortis deal

  • The European Central Bank announced it would lend eurozone banks €120 billion in “a special term refinancing operation.” (Photo: European Commission)

Despite Benelux governments announcing a partial nationalisation of Fortis Bank on Sunday, the ongoing financial crisis continued to collect scalps through Europe on Monday (29 September), with the UK and Germany intervening to save financial institutions. Meanwhile, the European Central Bank has announced it would lend eurozone banks €120 billion in "a special term refinancing operation."

The decision by the Belgian, Dutch and Luxembourger governments to purchase half the Belgo-Dutch banking giant for €11.2 billion represents the biggest bailout of a European bank since the beginning of the crisis.

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The European Commission said on Monday it had been consulted during the negotiations and had so far no reason to believe the deal was in breach of EU competition rules.

"Up until now the national authorities in Belgium, the Netherlands and Luxembourg have been listening to what the commission has been saying, so we have no reason to think that what they are going to notify the commission of is not going to be acceptable to the commission in terms of state aid rules," Jonathan Todd, a spokesperson for the institution told a press briefing in Brussels.

He said the transaction itself was in compliance with the rules, as the purchase did not exceed the going market rate. He also expressed confidence that any "accompanying measures" that may be taken alongside the purchase, of which the commission will be notified "will be compatible with the rules on competition, in particular the rules on state aid."

'Contagion' spreads to UK, Germany

Meanwhile, the British government nationalised mortgage lender Bradford & Bingley on Monday, taking over some €62 billion (£50 billion) of the bank's mortgages.

"We will work night and day to make sure that Britain can come through fairly this downturn," Prime Minister Gordon Brown told reporters.

In Germany too, the government is to provide a guarantee to save Hypo Real Estate Holding – the country's second biggest commercial property lender, from insolvency.

The grim financial news did not let up throughout the day, with Belgo-French bank Dexia's shares plunging to a record low of €6.75, after Le Figaro newspaper reported on Monday it planned to raise capital.

Both France and Belgium said they would help Dexia, if needed, according to reports from Agence France Presse, although the bank itself claims it is in no immediate danger of collapse.

French President Nicolas Sarkozy on Monday (29 September) announced he will meet banks' and insurance companies' directors tomorrow to assess the financial sector's situation in his country, his office announced.

He has also stated that as EU president-in-office he would propose initiatives for a European response to the crisis during a EU leaders meeting in Brussels on 15 October.

ECB pours €120 billion

Separately, the European Central Bank announced on Monday it would lend eurozone banks €120 billion via a special term tender aimed at soothing liquidity tensions.

"The governing council of the European Central Bank (ECB) decided to conduct a special term refinancing operation. The aim of this operation is to improve the overall liquidity position of the euro area banking system," the bank said in a statement.

"[The special term refinancing operation] will be settled on Tuesday, 30 September 2008 and will mature on Friday, 7 November 2008," but it will be renewed "at least until beyond the end of the year," the institution added.

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