UK shockwaves over Fortis rescue
Updated on 29 September 2008
Three European governments have been forced to nationalise Fortis, Belgium's largest retail bank and the UK's third-largest car insurer.
In a bid to avert further stock market turbulence, the governments of Belgium, the Netherlands and Luxembourg had to step in to rescue the bank, which was the Royal Bank of Scotland's partner for the takeover of ABN Amro.
In London, RBS stocks tumbled more than 15 per cent at one stage on the news that Fortis - handed an £8.9 billion cash injection by the three governments in return for a 49 per cent stake - must now sell its stake in ABN.
The group paid £19 billion for its share of ABN, which was sold for nearly £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 £4 billion.
In the UK, it offers travel, car and house insurance under the Fortis brand, as well as commercial insurance for businesses. The group has UK offices at locations including Eastleigh in Hampshire and Brockworth, Gloucester.
Fortis is the first major bank crisis to hit the euro zone in 13 months of global turmoil that began in the United States. The nationalisation followed unprecedented emergency talks with European Central Bank President Jean-Claude Trichet on Sunday.
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."
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