October 4, 2008 3:00 am
The Dutch government last night ripped up the week-old bail-out of Fortis, announcing it would spend €16.8bn to take full control of the Belgo-Dutch banking and insurance group's operations on its side of the border.
The move marks the effective nationalisation of ABN Amro, one of the biggest retail banks in the Netherlands. It also represents a further setback to hopes for a co-ordinated pan-European response to the financial crisis after a week when seven European governments bailed out their local banks and Ireland guaranteed the debts and deposits of its six largest lenders.
Wouter Bos, Dutch finance minister, said the government took the decision after the state-backed rescue of Fortis unveiled last weekend had failed to stabilise the bank. That deal saw the Netherlands, Belgium and Luxembourg each buy 49 per cent of Fortis's local banking subsidiaries for a combined €11.2bn.
"Two weeks ago we saw how a healthy company lost the confidence of the stock market and this week we saw how the same company was actually doing well on the stock market, but in banking practice came up against ever greater liquidity problems," Mr Bos said.
Yves Leterme, Belgium's prime minister, said the cash injection from the Dutch into the rest of Fortis gave it "renewed vigour". But bankers said the €16.8bn price tag was as much as €10bn below the fair market value for Fortis's assets.
Belgium will go ahead with its €4.7bn purchase of 49 per cent of Fortis's Belgian banking subsidiary, while Luxembourg will also complete its purchase.
Mr Bos said: "We've protected healthy parts of the company from possible infection from parts that were less healthy and it has delivered so much cash to the Belgian side of the company that the problems there should be able to be solved."
Bankers said the Dutch government's decision had been triggered after a deal to sell ABN Amro to ING, the rival Dutch group, fell apart on Monday.
The Dutch government, which will finance the acquisition through borrowing, said it would privatise the Fortis and ABN Amro operations after calm returned to the markets. As part of the deal it will take Fortis's share of the joint venture with Royal Bank of Scotland and Santander of Spain that last year paid €71bn to buy ABN Amro.
The deal covers 720 offices and 45,000 employees, 30,000 at ABN Amro, 10,000 at Fortis Bank in the Netherlands and the rest at Fortis's Dutch insurance arm.
In it together, Page 7 Europe taken by surprise, Page 10 www.ft.com/eurobanks
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