Friday, October 03, 2008

Major Dutch Bank FORTIS Nationalised by Dutch Government due to international credit crisis

Radio Netherlands Worldwide:
The Dutch government is taking over the Dutch activities of Fortis bank, at a cost of 16.8 billion euros. Prime Minister Jan Peter Balkenende announced the takeover at a press conference on Friday afternoon, alongside Finance Minister Wouter Bos and Central Bank President Nout Wellink.

The move is meant to reassure investors in the troubled banking group. It comes just one week after the Dutch government said it would buy 49 percent of the Fortis activities in the Netherlands, part of a deal agreed with the governments of Belgium and Luxembourg. The new arrangement supersedes last week's deal.

Fortis has been victim to the international credit crisis. It could no longer raise the money needed to pay for its purchase of the ABN AMRO bank, a deal reached eighteen months ago and also involving Royal Bank of Scotland and Banco Santander. The Fortis share in that deal has now been brought into question.

In addition, the bank started losing customers in the Netherlands and in Belgium. The value of its shares fell to a record low.

Prime Minister Balkenende says that, with the purchase of Fortis, he wants to bring calm and stability to the financial sector during a turbulent time. Finance Minister Bos said the Dutch government is protecting the interest of the bank's customers, and making sure the finance climate in the Netherlands is safe.

Asked what the criteria for such a move was, Mr Bos said, "The Netherlands will take action if and when financial institutions crucial to the stability and integrity of the financial system get into significant trouble." He was quick to add that no other Dutch institution is currently facing such trouble.

The finance minister will have some explaining to do in parliament this coming week. He has been reassuring Dutch lawmakers about the soundness of the deal agreed last week to buy 49 percent of Fortis activities in the Netherlands, while behind-the-scenes negotiations were underway for a complete takeover of the Dutch divisions of the bank.

The move, effectively nationalising one of the largest banks in the Netherlands, goes against the trend of the last few decades of selling off government interests. Mr Bos says he cannot say yet how long the government will keep the bank.

- Radio Netherlands:Dutch government nationalises Fortis

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