2008 Belgian financial crisis

The 2008 Belgian financial crisis is a major financial crisis that hit Belgium from mid-2008 onwards. Two of the country's largest banks - Fortis and Dexia - started to face severe problems, exacerbated by the financial problems hitting other banks in the world. The value of their stocks, as well as the stocks of most other Belgian companies plunged. The government tried to control the situation by bailing-out banks and guaranteeing bank deposits. Eventually Fortis was split into two parts - the Dutch one was nationalized, while the Belgian one was sold to the French bank BNP Paribas.

Context

:"See also: Credit crunch

Bank crises

Fortis

Fortis was the largest Belgian bank in early 2008, positioned mainly in the Benelux. From mid-2008 onwards, the bank began facing severe liquidity problems and its stock value began rapidly declining. The problem was exarcerbated by the earlier acquisition of the Dutch bank ABN Amro, which had depleted Fortis' capital. [cite web |url=http://www.iht.com/articles/2008/07/13/business/fortis.php |title=Fortis chief executive out; chairman now faces shareholder anger |publisher=International Herald Tribune |date=2008-07-13 |accessdate=2008-09-29] Since the beginning of 2008, about 3% of the deposits stalled at the bank were withdrawn. [cite web |url=http://uk.reuters.com/article/hotStocksNews/idUKLR15751720080927 |title=FACTBOX-Finances at Belgian-Dutch group Fortis |publisher=Reuters |date=2008-09-27 |accessdate=2008-09-29] Belgian and Dutch ministers and financial regulators met each other on 27 September to tackle the crisis. cite web |url=http://www.bloomberg.com/apps/news?pid=20601087&sid=a3kZTkkP0.uY |title=Belgian, Dutch Regulators Seek to Boost Confidence in Fortis |publisher=Bloomberg.com |date=2008-09-28 |accessdate=2008-09-29] cite web |url=http://www.iht.com/articles/reuters/2008/09/27/business/OUKBS-UK-FORTIS.php |title=Talks on future of Fortis to run into Sunday |publisher=International Harald Tribune |date=2008-09-27 |accessdate=2008-09-29] .

The following day, Fortis was partially nationalised on September 28, 2008, with Belgium, the Netherlands and Luxembourg investing a total of €11.2 billion (US$16.3 billion) in the bank. Belgium will purchase 49% of Fortis's Belgian banking division, with the Netherlands doing the same for the Dutch banking division. Luxembourg has agreed to a loan convertible into a 49% share of Fortis's Luxembourg banking division. [cite news |url=http://www.bloomberg.com/apps/news?pid=20601087&sid=ahlKDjeO0Lik&refer=home |title=Fortis Gets EU11.2 Billion Rescue From Governments |publisher=Bloomberg |date=2008-09-29 |accessdate=2008-09-29 |first=Martijn |last=van der Starre |coauthors=Meera Louis]

The Dutch government purchased the Dutch banking and insurance division of Fortis for €16.8 billion ($23.3 billion), [ [http://www.tijd.be/nieuws/ondernemingen_financien/Fortis_wordt_ontmanteld.8085481-433.art Fortis wordt ontmanteld] nl] becoming the holder of Fortis Bank Nederland, Fortis Verzekeringen Nederland and Fortis Corporate Insurance, including the part of ABN Amro held by Fortis. [ [http://www.minfin.nl/Actueel/Nieuwsberichten/2008/10/Nederlandse_staat_neemt_Fortis_Bank_Nederland_Fortis_Verzekeringen_Nederland_Fortis_Corporate_Insurance_en_het_Fortis_deel_van_ABN_AMRO_Holding_volledig_over Nederlandse staat neemt Fortis Bank Nederland, Fortis Verzekeringen Nederland, Fortis Corporate Insurance en het Fortis-deel van ABN AMRO Holding volledig over] nl] BNP Paribas, a French bank, took a majority stake in Fortis, while Belgian and Luxembourg governments became minority shareholders with blocking power in exchange for shares in BNP Paribas. [cite web|url=http://www.tijd.be/nieuws/ondernemingen_financien/'Overname_Fortis_Bank_door_BNP_rond'.8086128-433.art|title='Overname Fortis Bank door BNP Paribas rond'|publisher=De Tijd|date=2008-10-05|accessdate=2008-10-05 nl ] The deal does not include the main holding company, but does include the insurance and banking subsidiaries, except for Fortis Insurance International. [cite web|url=http://www.standaard.be/Artikel/Detail.aspx?artikelId=DMF05102008_045&ref=front|title=BNP Paribas koopt ook Fortis Insurance|publisher=De Standaard|date=2008-10-05|accessdate=2008-10-05 nl ] [cite web|url=http://www.tijd.be/nieuws/ondernemingen_financien/'Overname_Fortis_Bank_door_BNP_rond'.8086128-433.art|title='Overname Fortis Bank door BNP Paribas rond'|publisher=De Tijd|date=2008-10-05|accessdate=2008-10-05 nl ] Dutch and Belgian shareholders' associations have requested a review of the takeover. [cite web|url=http://www.tijd.be/nieuws/economie-financien/Verzet_tegen_overname_van_Fortis_groeit.8087868-600.art|title=Verzet tegen overname van Fortis groeit|publisher=De Tijd|date=2008-10-08|accessdate=2008-10-08 nl] [cite web|url=http://www.iht.com/articles/ap/2008/10/08/business/EU-Belgium-Fortis.php|title=Fortis shareholders may ask for vote|publisher=International Herald Tribune|date=2008-10-08|accessdate=2008-10-08 en] On October 6 CBFA, the financial services regulatory authority for Belgium, announced that trade in Fortis shares was put on hold and permission the resume trading will be given after Fortis has published enough information about the remaining assets within Fortis. [cite web|url=http://news.google.nl/news/url?sa=t&ct=/7-0&fp=48ed70c0ac65fd31&ei=dijtSP7-CKaowAH_85G9Ag&url=http%3A//www.tijd.be/nieuws/ondernemingen_financien/Handel_in_Fortis_blijft_opgeschort.8086942-433.art&cid=1246104024&usg=AFQjCNFpkAHwEebR095pc_Ot2TwGTe3xew|title='Handel_in_Fortis_blijft_opgeschort'|publisher=De Tijd|date=2008-10-08|accessdate=2008-10-08 nl]

Dexia

On 30 September 2008 the Belgian, French and Luxembourg governments said they would put in €6.4bn ($9bn; £5bn) into keep Dexia afloat. [cite web |url=http://news.bbc.co.uk/1/hi/business/7643638.stm |title=Second Belgian bank gets bail-out |publisher=BBC News |date=2008-09-30 |accessdate=2008-09-30] The rating agency Moody's downgraded Dexia's long term debt and deposits ratings from Aa1 to Aa3, [Moody's. [http://www.moodys.com/moodys/cust/loadBusLine.asp Banking] . Highlights. Requires free registration. Retrieved 2008-10-06] and downgraded the individual banks' strengths to C- ("adequate intrinsic financial strength") with a negative outlook. [ [http://www.moodys.com/moodys/cust/displaySummary.asp?busLineId=6&original=1&document_id=1506800000006916 Moody's] . Press release with details of Dexia's various ratings. Requires free registration. Retrieved 2008-10-06] The problems at Dexia stem in part from a multi-billion loan to troubled German bank Depfa. [cite web|url=http://www.standaard.be/Artikel/Detail.aspx?artikelId=DMF05102008_017|title=Regering moet twee banken redden|publisher=De Standaard|date=2008-10-05|accessdate=2008-10-05] The Dexia board stated on 5 October 2008 that the capital addition by the governments would put it in a position in which it could deal with detoriating market conditions, and that the credit risks associated with Hypo Real Estate and Depfa are only limited. [cite web|url=http://www.tijd.be/nieuws/ondernemingen_financien/'Dexia_kan_hoofd_bieden_aan_verslechterende_marktomstandigheden'_.8086121-433.art|title='Dexia kan hoofd bieden aan verslechterende marktomstandigheden'|publisher=De Tijd|Date=2008-10-05|accessdate=2008-10-05] [cite web|url=http://www.dexia.com/docs/2008/2008_news/20081005_bd_uk.pdf|title=05/10/2008 press release - Board of Directors|publisher=Dexia|date=2008-10-05|accessdate=2008-10-05] [cite web|url=http://www.dexia.com/e/news/press-release-desc.php?id=4110&p=0|title=05/10/2008 press release - Dexia - Hypo Real Estate (HRE)|publisher=Dexia|date=2008-10-05|accessdate=2008-10-05]

Government reaction

Besides the bail-outs of both Fortis and Dexia, the government also guaranteed all bank savings up tp 20,000 euro. On Saturday 11 October, the government announced that all banks, including the smaller ones, could obtain a similar guarantee on the condition that they are solvent and pay a fee. [http://www.deredactie.be/cm/de.redactie/economie/081011_leningen_garantie] Didier Reynders, minister of finance, also said that the government is drawing up plans to guarantee all savings up to 100,000 euro.

tock market reaction

The BEL-20 stock market lost more than 20% of its value during the week of 6-10 October, making it the largest weekly decline in the country stock exchange history.Fact|date=October 2008

References