Revisiting regulatory wisdom

When the dust settles on whatever form of banking bailout the US Congress eventually approves, attention will turn to reassessing the philosophy that got the US to this point.  But perhaps Europe will have to revisit some conventional wisdom too.  Consider the case of Benelux financial services giant Fortis, which if this evening’s reports are to be believed, will soon be getting some kind of bailout of its own, most likely with the Belgian and Dutch central banks taking on some of the bad assets.  Fortis has been stuck for cash since it joined a Royal Bank of Scotland consortium bidding for ABN Amro against Barclays — the latter bid being trumped by the higher cash portion in the former.  The consortium’s idea was to break up ABN Amro, whereas Barclays was bidding for the group as a whole.  The Dutch central bank was uneasy about the breakup idea, but just over 15 months ago, it was seen as the brave new world of cross-border European banking.  Now it looks like classic winner’s curse.  Barclays lost but since got to pluck the meat from Lehman Brothers.  And Europe gets sucked into banking bailouts, big time.

7 thoughts on “Revisiting regulatory wisdom

  1. And we Dutch regain ABN AMRO (Europe at least) as it’s taken over by IBN for a measly 10B EURO (it was sold for a much less measly 24B EURO!).

    Reports leaked this evening that the Belgian and Luxembourgian (sp?) central banks will in fact do the “bailing out” for Fortis.

  2. Lacking an -edit- button I apologise for the double-post.

    I just read the following on a Dutch popul(ar/ist) weblog:
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    Which translates to:
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  3. It’s funny, Thomas. The Dutch were accused of nationalism for wanting an intact ABN Amro. Now in effect they are getting it back — and it’ll be tough for any policymakers to criticise what they are doing.

  4. It was and still is a thing of great nationalist pride and sensitivities. To be getting the European part of the ABN/AMRO back now for a fraction of the price it was sold for a year ago only adds to it.

    The portion of my previous post that was lost basically read that there will be 11.2 billion euro invested in Fortis by the Benelux nations. 4 billion of which come from the Netherlands. ING is the expected buyer of ABN/AMRO.

    It’s interesting to see that the people who criticised the american bailout seem to have no problems with a similar thing happening in the Benelux. Without blinking an eye 4 billion euro is spent. Granted it’s less than a percent of the scale of the American plans but it isn’t exactly lunch money either.

    Perhaps we do need a more critical stance towards politics. I wonder if it’s reasonable to say that 14 billion in profits makes 10 billion in profits now. Where did the 24 billion go way back when… Let’s just hope it wasn’t invested in American banks.

  5. And it’s done. Gone to the man in the nainsook tarboosh for 18 trillion piastres, or rather, 49% of the Belgian, Dutch, and Luxemburgish operating companies to the respective central banks.

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