Belgium, The Netherlands and Luxembourg put together a 11.2 billion euros rescue package to nationalise Fortis bank. British bank Bradford & Bingley and German mortgage lender Hypo Real Estate are also said to be nearing bankruptcy.
The global financial crisis took a toll on Europe on Sunday, with top officials scrambling to save Fortis bank and Britain reportedly planning to nationalise mortgage lender Bradford & Bingley.
As US lawmakers reached a deal on an unprecedented 700-billion-dollar bailout, high-ranking European officials raced to hammer out a plan aimed at keeping Fortis from becoming another victim of the crisis.
Shares in the Belgian-Dutch banking and insurance group lost more than a third of their value in the last two weeks amid market concerns over its solvency and its ability to raise funds to absorb its acquisition of former Dutch rival ABN Amro.
The plight of Fortis, Belgium's leading bank and the second biggest in the Netherlands with 85,000 employees, led to high-level talks in a bid to rescue it amid fears that its woes were a symptom of further troubles in Europe.
European Central Bank President Jean-Claude Trichet met Belgian Prime Minister Yves Leterme to discuss possible solutions for the company, a spokesman for Leterme said.
Trichet also participated in a Belgian government meeting on Sunday evening, along with Dutch Finance Minister Wouter Bos and Nout Wellink, president of the Netherlands Central Bank, according to Dutch and Belgian sources.
Luxembourg Budget Minister Luc Frieden said the Benelux countries, where Fortis has its main operations, were prepared to step in with help by buying stakes in the group if a takeover did not emerge.
"There are two possibilities available: the first is that a foreign bank takes over the whole group and otherwise the state could take a stake in the bank," Frieden told Luxembourg television.
If a takeover proved impossible, "the Luxembourg government (would) take an important role in Fortis, the Belgian government would do the same thing and the Dutch government," he said.
French newspaper Le Figaro reported that BNP Paribas could be set to take over Fortis, saying that "secret negotiations that have continued over the weekend could culminate in the coming hours."
Belgian media had reported earlier that BNP, the French banking and insurance giant, and Dutch rival ING had emerged as the most serious potential buyers of Fortis but were demanding state guarantees.
The talks to rescue Fortis came as media reports said British bank Bradford & Bingley will be nationalised soon.
The BBC website, which did not cite its source, said an announcement was due later Sunday and added that parts of Bradford & Bingley would be sold almost immediately to another bank or banks.
Bradford & Bingley stock has slumped in recent weeks amid fears it could become another Northern Rock, which was nationalised earlier this year after a severe funding crisis and a run on its branches.
The collapse of B&B, which specialises in mortgages for investors buying homes in order to rent them out, would mark the latest casualty in Britain's banking sector after a deal was agreed for HBOS to be bought by rival Lloyds TSB earlier this month.
Meanwhile, Financial Times Deutschland reported that Germany's Hypo Real Estate, a mortgage bank, was on the brink of bankruptcy.
Last week, Jean-Claude Juncker, chairman of eurozone finance ministers, had urged US authorities to agree quickly a bailout plan for the crisis-struck financial sector.
"My hope is that they will do it quickly because, when I look at financial and stock markets, exchange rates and global confidence indicators, the Americans' hesitation over their intentions deepens uncertainty."
Top EU officials have said that Europe does not need a US-style bailout plan for the financial sector, limiting their response to the current crisis to calls for tougher regulation.
The bailout deal in the United States was a bid to avert the worst financial crisis since the Great Depression.
It came after nine days of marathon negotiations, anxiously watched by jittery markets and governments worried about a meltdown in the world's biggest economy.
According to a summary of the draft plan, the deal would release some 350 billion dollars initially and condition future payments on Congressional approval.
Date created : 2008-09-28