Future of Fortis uncertain as crisis talks held

FORTIS FACED a takeover or break-up last night as European Central Bank president Jean-Claude Trichet held emergency talks with Dutch and Belgian lawmakers to restore faith in the Belgian-Dutch financial group.

Mr Trichet, who as ECB head is responsible for safeguarding financial stability in the euro zone, joined Belgian prime minister Yves Leterme in Brussels in a bid to secure the future of Fortis, including a partial or full sale or some form of state intervention, a source familiar with the situation said.

BNP Paribas and ING Group both declined to comment on reports that they could buy all of Fortis or Dutch bank ABN Amro, which Fortis bought a year ago.

The problems at Fortis, whose shares dropped by a third last week on investor concerns about its liquidity and funding, stem from last year's €70 billion purchase of ABN with partners Royal Bank of Scotland and Spain's Santander.

A key issue in any purchase of Fortis or ABN AMRO was whether the Belgian government would provide financial guarantees, the source said.

At the same time, financial authorities in Belgium and the Netherlands scrambled to prepare reassurances on the integrity of the wider Benelux financial system, after holding talks late into Saturday evening, finance officials said.

Belgian financial regulator, the Banking, Finance and Insurance Commission (CBFA) was working with the central bank, examining initiatives to restore confidence in Fortis, with an announcement expected today.

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

Fortis - which is a partner with An Post in Postbank - has been weighed down by its €24 billion outlay for ABN in a market that is neither conducive to more capital increases nor willing to pay for the assets it wants to sell.

As its shares plummeted more than 20 per cent 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 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.

Marianne Thyssen, chairwoman of Prime Minister 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 per cent."

After a fifth straight day of share declines, Fortis on Friday named a new chief executive, hastily replacing interim incumbent Herman Verwilst with banking chief Filip Dierckx. - (Reuters)