SHARES IN Fortis, one of Europe's biggest financial services firms, continued to fall yesterday despite a part-nationalisation plan by Belgium, The Netherlands and Luxembourg.
The three countries are to pump €11.2 billion into Fortis after the effects of the credit crunch threatened the bank. The governments will take minority stakes in the bank and Fortis will have to sell the Dutch banking operations of ABN Amro which it bought last year.
Shares in Fortis dropped 35 per cent on Friday following concerns that the bank was short of capital. The governments stepped in over the weekend after PNB Paribas pulled out of a proposed buy-out after offering €1.60 for shares worth €5.20 at Friday's low.
PNB Paribas also demanded some state guarantees against future losses. Shares dropped almost a further 24 per cent yesterday.
"We could have not intervened, but the question was whether Fortis would have survived on Monday," said Dutch finance minister, Wouter Bos.
The Belgian government said yesterday if needed it would also support Dexia, a French-Belgian bank which loans to locals governments, after its share price dropped 30 per cent yesterday.
Belgium announced it would invest €4.7 billion to buy 49 per cent of Fortis's equity, while Luxembourg and The Netherlands are to spend €2.5 billion and €4 billion, respectively, buying 49 per cent stakes in the bank's units in those countries.
"We have taken up our responsibility, we did not abandon the savers," said Belgian prime minister Yves Leterme.
The president of the European Central Bank, Jean-Claude Trichet, was also involved in the weekend rescue plan.
The European Commission yesterday said that the plan appeared to be in line with EU regulation.
"We are confident that the accompanying measures which are going to be notified will be compatible with the rules on competition, in particular the rules on state aid," commission competition spokesman Jonathan Todd said.
While the three governments said Fortis had been hit by loss of confidence arising out of the credit crunch, the bank's new chief executive yesterday acknowledged that mistakes had been made.
"If you look at some of the decisions that were taken in the past, then you can say that probably they were done at the wrong moment," said Filip Dierckx, who took over on Friday.
"We thought it was a good strategic decision, but evidently in this environment it was imprudent to continue with the integration of ABN Amro," he added.
Fortis is the biggest private sector bank in Belgium with over 1.5 million households banking with the group.
