Fortis, authorities scramble to restore confidence

Dutch and Belgian media reported that BNP Paribas was a potential buyer for all of Fortis or Dutch bank ABN AMRO, which Fortis acquired as part of a consortium a year ago, while Dutch rivals ING or Rabobank might be eyeing Fortis's private banking.

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The banks declined to comment on the reports.Â

 

At the same time, financial authorities in Belgium and the Netherlands were preparing to provide reassurances on the integrity of the Benelux financial system, after holding intense discussions late into Saturday evening, a source familiar with the situation told Reuters.

 

Dutch and Belgian banking supervisory officials were talking in Brussels on Sunday.

 

Belgium's financial regulator, the Banking, Finance and Insurance Commission (CBFA), and the central bank were examining initiatives to restore confidence in Fortis, with an announcement expected in the late afternoon or evening, a CBFA spokesman said.

 

Officials from central banks, supervisors and government treasury departments were also converging in Amsterdam on Sunday for a long-scheduled meeting of the Financial Stability Forum (FSF) chaired by Bank of Italy Chairman Mario Draghi, and a news briefing was rescheduled for Monday instead of Tuesday.

 

Fortis's problems stem from last year's purchase of ABN with partners Royal Bank of Scotland and Spain's Santander in a 70 billion euro ($102 billion) deal just as the credit crisis struck, slashing the value of banking assets.

 

Several sources familiar with talks involving Fortis have indicated that the financial group was preparing to announce specific and likely "substantial" steps to restore confidence.

BNP PARIBAS, ING INTERESTED?
Dutch financial daily Financieele Dagblad, citing an unnamed source, reported on its website that the sale of ABN was being considered. It added that BNP Paribas was a potential buyer for all of Fortis or just ABN.

 

Belgian daily De Standaard said on its website that BNP and ING were favorites to buy all or part of Fortis, with investment bankers already advising.

 

Fortis has been weighed down by its 24 billion euro outlay in a market that is neither conducive to more capital increases nor willing to pay handsomely for the assets it wants to sell.

 

As its shares plummeted more than 20 percent to 15-year lows on Friday, Fortis called an emergency news conference to say its position was strong and that it would expand asset sales to as much as 10 billion euros to raise cash.

 

The stakes are high in Belgium, where Fortis is the biggest private sector employer and where over 1.5 million households, roughly half the country, bank with the group. For what's at stake for Belgium, see.

 

Marianne Thyssen, chairwoman of Belgian Prime Minister Yves Leterme's Christian Democrats told Belgian television it was important the public should know their savings were safe.

 

"The government is ready to guarantee the full 100 percent."

 

After a fifth straight day of share declines, Fortis also named a new chief executive on Friday, replacing interim incumbent Herman Verwilst with banking chief Filip Dierckx, 52.

Dutch central bank (DNB) governor Nout Wellink cancelled a weekend trip to Chicago to return to the Netherlands. Wellink and Draghi are also members of the European Central Bank's Governing Council.

 

In London, regulators were in talks on the future of troubled lender Bradford & Bingley, raising the prospect that a second British bank could be nationalized.

 

Financial players around the world were hoping that U.S. lawmakers would sign off on a deal on Sunday to create a $700 billion government fund to buy bad debt from ailing banks in a bid to stem a credit crisis threatening the global economy.