Forget the US and its $US700 billion bailout brawl which seems to be almost sorted. The crisis has shifted to Europe where three major banks and financial groups are facing collapse this morning as authorities in Britain, Germany, Belgium and the European Central Bank struggle to contain the disaster.
In Germany a real estate mortgage bank called Hypo is reportedly on its last legs; in Belgium, the huge Fortis financial group is the centre of feverish attempts to stabilise it; in Britain the Bradford and Bingley mortgage bank is to be nationalised by the UK Government after the authorities failed to find a white knight.
Meanwhile in the US, the very large Wachovia regional bank is talking to at least three groups about a takeover, but it may not happen until the $US700 billion bailout fund happens, or not at all.
These further failures/rescues will further turn this September into the worst month for financial failures, surpassing October, which has long had the reputation as the toughest month of the year because of the great crash of 1929 and the plunge of 1987 happened.
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Belgium’s Fortis has grabbed the headlines in the past three days as it looked like becoming the first large European continental bank to fall victim to the credit crunch. It’s shares plunged last week as reports spread of problems, which were strongly denied.
Now, according to an announcement this morning, the governments of Belgium, the Netherlands and Luxembourg are investing 11.2 billion euros (or $US16.3 billion) in Fortis. It will be a partial nationalising of the bank as a last attempt to halt the slide in its share price and restore investor confidence.
Fortis, which dominates Belgium and is a major player in Holland, will also sell the stake it acquired in ABN Amro. That’s likely to raise questions about RBS, which has had problems of its own, raising $US25 billion in a rights issue and selling assets worth another $US8 billion several months ago in a bid to recapitalise. But that was based on Fortis proceeding with its purchase of the Dutch assets of ABN.
In Germany there are now reports that Germany’s Hypo Real Estate, a mortgage bank, is on the brink of bankruptcy.
The German website for the Financial Times reported that German banks have been trying to rescue the institution, which was already hit hard by the US subprime loan crisis.
The Munich-based bank, which is listed on Germany’s 30 blue chip Dax stockmarket index, is believed to have been brought to its knees by speculation by its German-Irish unit Depfa, which funded long term property deals with short term funds; a recipe for disaster these days. It is the fourth German bank to get into trouble and need bailing out since the crunch started in August of 2007.
The European Central Bank, its Belgian counterpart and the country’s government and market regulators are trying to organise a bailout of the huge banking and insurance group, which has a balance sheet of well over $A1.1 trillion and a market value at last Friday of just over $A25 billion.
In Britain Bradford & Bingley, a major mortgage group, looks like being nationalised and then sold off. The Bank of England, the Financial Services Authority (like APRA in Australia) and the government appear to have agreed to nationalise B&B and then sell it off, much in the way the US regulators closed and seized Washington Mutual last Friday morning and then sold the loans, deposits and branches to JPMorgan Chase.
Santander, the Spanish bank, is in negotiations to buy B&B, but it is insisting on conditions.
It would be the second British bank to be nationalized this year after Britain was forced to take Northern Rock into public ownership in February. Major mortgage lender, HBOS was forced into the arms of the sounder Lloyds TSB two weeks ago by the UK Government and regulators.