Fortis Is on Verge of
Government Rescue 

CARRICK MOLLENKAMP, DANA CIMILLUCA and JOELLEN PERRY
Wall Street Journal 29sep2008

LONDON — Fortis NV, the Dutch-Belgian bank whose roots date to the 1800s, is on the verge of becoming the latest target of a government rescue, according to people familiar with the situation.

The governments of Belgium, Luxembourg and possibly the Netherlands, the three countries in which Fortis operates, were planning late Sunday to offer the bank a lifeline after failing to find a buyer, the people said. Fortis had been in talks to sell all or part of itself to ING Groep NV, the big Dutch financial firm, or French bank BNP Paribas SA, the people said.

The plan may buy time for Fortis management to sell off assets and remain independent, albeit as a smaller business. The bank operates insurance and retail banking businesses throughout the wealthy Benelux region.

Representatives for the three banks either declined to comment or weren't immediately available for comment.

European Central Bank President Jean-Claude Trichet met Sunday afternoon with Belgian Prime Minister Yves Leterme to discuss the Fortis situation, said a spokesman for Mr. Leterme. Mr. Leterme also called Belgium's government ministers to an emergency meeting Sunday evening to present the range of solutions being discussed. Some of the solutions on the table would require government involvement, for which Mr. Leterme would need the ministers' approval.

Fortis has struggled in recent days amid a crisis of confidence that has seized the markets on which banks depend to borrow money. Its share price fell 20% Friday, to €5.20 ($7.60), and its shares are down 71% this year.

On Friday, the bank unexpectedly replaced its interim chief executive, Herman Verwilst, just hours after he tried unsuccessfully to reassure investors that the bank remains on sound footing. Hours after he spoke, the bank named Filip Dierckx, currently head of the Belgian-Dutch company's banking unit, as Fortis's new CEO.

Officials from the Belgian central bank, the Dutch central bank and Belgium's Banking, Finance and Insurance Commission, or CBFA, began meeting Saturday in person and on the phone to hammer out a solution for Fortis. The in-person and telephone meetings continued through Sunday.

"We are working on enhancing the confidence in the market" for Fortis, CBFA spokesman Hein Lannoy told The Wall Street Journal on Sunday. Officials from the Dutch central bank declined to comment Sunday. The Belgian National Bank couldn't be reached for comment.

A bailout of Fortis is likely to raise more questions about the company's decision last year to join in the biggest banking deal ever: The purchase by a European consortium of Dutch bank ABN Amro Holding NV just before the onset of the credit crisis. Next year, Fortis is expected to take possession of ABN's private-client unit and Dutch operations, pending Dutch regulatory approval. Those assets currently reside in a holding company set up to facilitate the ABN-Amro purchase. Fortis's stake in that holding company could be sold, said people familiar with the situation

Supervision of Fortis is split between Dutch and Belgian authorities. Belgium's CBFA is the lead supervisor for Fortis's banking operations at the holding level, while the Dutch central bank supervises the firm's insurance activities, as well as the Dutch arm of the banking unit. Bank supervision in Belgium is handled by the CBFA and in Holland by the central bank.

source: 28sep2008