2008–2009 Belgian financial crisis
Encyclopedia
The 2008–2009 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 part was nationalized, while the Belgian part was sold to the French bank BNP Paribas.
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 exacerbated by the earlier acquisition of the Dutch bank ABN Amro, which had depleted Fortis' capital. Since the beginning of 2008, about 3% of the deposits stalled at the bank were withdrawn. Belgian and Dutch ministers and financial regulators met each other on 27 September to tackle the crisis.
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.
The Dutch government purchased the Dutch banking and insurance division of Fortis for €16.8 billion ($23.3 billion), becoming the holder of Fortis Bank Nederland, Fortis Verzekeringen Nederland and Fortis Corporate Insurance, including the part of ABN Amro
held by Fortis. 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. The deal does not include the main holding company, but does include the insurance and banking subsidiaries, except for Fortis Insurance International. Dutch and Belgian shareholders' associations have requested a review of the takeover. 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.
downgraded Dexia's long term debt and deposits ratings from Aa1 to Aa3, and downgraded the individual banks' strengths to C- ("adequate intrinsic financial strength") with a negative outlook. The problems at Dexia stem in part from a multi-billion loan to troubled German bank Depfa. 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.
Because KBC is seen by the Walloons as a mainly Flemish bank, the federal government could not reach an agreement to aid the bank. In January 2009, the Flemish government stepped in KBC for €2 billion.
, minister of finance, also said that the government is drawing up plans to guarantee all savings up to €100,000.
Belgium
Belgium , officially the Kingdom of Belgium, is a federal state in Western Europe. It is a founding member of the European Union and hosts the EU's headquarters, and those of several other major international organisations such as NATO.Belgium is also a member of, or affiliated to, many...
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 part was nationalized, while the Belgian part was sold to the French bank BNP Paribas.
Fortis
Benelux
The Benelux is an economic union in Western Europe comprising three neighbouring countries, Belgium, the Netherlands, and Luxembourg. These countries are located in northwestern Europe between France and Germany...
. From mid-2008 onwards, the bank began facing severe liquidity problems and its stock value began rapidly declining. The problem was exacerbated by the earlier acquisition of the Dutch bank ABN Amro, which had depleted Fortis' capital. Since the beginning of 2008, about 3% of the deposits stalled at the bank were withdrawn. Belgian and Dutch ministers and financial regulators met each other on 27 September to tackle the crisis.
The following day, Fortis was partially nationalised on September 28, 2008, with Belgium
Belgium
Belgium , officially the Kingdom of Belgium, is a federal state in Western Europe. It is a founding member of the European Union and hosts the EU's headquarters, and those of several other major international organisations such as NATO.Belgium is also a member of, or affiliated to, many...
, the Netherlands
Netherlands
The Netherlands is a constituent country of the Kingdom of the Netherlands, located mainly in North-West Europe and with several islands in the Caribbean. Mainland Netherlands borders the North Sea to the north and west, Belgium to the south, and Germany to the east, and shares maritime borders...
and Luxembourg
Luxembourg
Luxembourg , officially the Grand Duchy of Luxembourg , is a landlocked country in western Europe, bordered by Belgium, France, and Germany. It has two principal regions: the Oesling in the North as part of the Ardennes massif, and the Gutland in the south...
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.
The Dutch government purchased the Dutch banking and insurance division of Fortis for €16.8 billion ($23.3 billion), becoming the holder of Fortis Bank Nederland, Fortis Verzekeringen Nederland and Fortis Corporate Insurance, including the part of ABN Amro
ABN AMRO
ABN AMRO Bank N.V. is a Dutch state-owned bank with headquarters in Amsterdam. It was re-established, in its current form, in 2009 following the acquisition and break up of ABN AMRO Group by a banking consortium consisting of Royal Bank of Scotland Group, Santander and Fortis...
held by Fortis. BNP Paribas
BNP Paribas
BNP Paribas S.A. is a global banking group, headquartered in Paris, with its second global headquarters in London. In October 2010 BNP Paribas was ranked by Bloomberg and Forbes as the largest bank and largest company in the world by assets with over $3.1 trillion. It was formed through the merger...
, 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. The deal does not include the main holding company, but does include the insurance and banking subsidiaries, except for Fortis Insurance International. Dutch and Belgian shareholders' associations have requested a review of the takeover. 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.
Dexia
On 30 September 2008 the Belgian, French and Luxembourg governments said they would put in €6.4bn ($9bn; £5bn) into keep Dexia afloat. The rating agency Moody'sMoody's
Moody's Corporation is the holding company for Moody's Analytics and Moody's Investors Service, a credit rating agency which performs international financial research and analysis on commercial and government entities. The company also ranks the credit-worthiness of borrowers using a standardized...
downgraded Dexia's long term debt and deposits ratings from Aa1 to Aa3, and downgraded the individual banks' strengths to C- ("adequate intrinsic financial strength") with a negative outlook. The problems at Dexia stem in part from a multi-billion loan to troubled German bank Depfa. 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
Hypo Real Estate
The Hypo Real Estate Holding AG is a holding company based in Munich, Germany which comprises a number of real estate financing banks. The company's activities span three sectors of the real estate market: commercial property, infrastructure and public finance, and capital markets and asset...
and Depfa are only limited.
KBC
On Saturday 25 October, KBC, another large Belgian bank is reported to be in talks with the Belgian government, hoping to obtain a €3.5 billion cash injection. The company, which is also active in Central Europe, fears the adverse impact of the financial woes hitting that region. The extra cash would be used to increase its risk buffer. Since the beginning of October, the share value of KBC dropped by more than half as well.Because KBC is seen by the Walloons as a mainly Flemish bank, the federal government could not reach an agreement to aid the bank. In January 2009, the Flemish government stepped in KBC for €2 billion.
Government reaction
Besides the bail-outs of both Fortis and Dexia, the government also guaranteed all bank savings up to €20,000. 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. Didier ReyndersDidier Reynders
Didier J.L. Reynders is a Belgian politician and a member of the Mouvement Réformateur . He is Belgian Deputy Prime Minister and Minister for Finance and Institutional Reforms in the Van Rompuy I Government, which took office on 30 December 2008.He was born in Liège as the youngest in a family of...
, minister of finance, also said that the government is drawing up plans to guarantee all savings up to €100,000.