Governments bail out Fortis

Belgium_1455_18800476_0_0_7011583_300.jpg" width="200"/>The governments of Belgium, the Netherlands and Luxembourg have agreed to bail out troubled bank Fortis with an €11.2 billion (£8.9 billion) investment.

Banking and insurance group Fortis was in danger of collapsing under the pressure of the financial crisis, which has this week claimed UK lender Bradford & Bingley.

"The actions taken by the Belgian, Luxembourg and Dutch governments are a sign of confidence in Fortis and of comfort to customers and all other stakeholders alike," said Fortis chief executive elect Filip Dierckx.

"These actions ensure the financial strength and stability of our company going forward."

The governments will receive significant board representation, Fortis said.

The group has announced the sale of its stake in RFS Holdings, through which Fortis operates the acquired ABN Amro units.

Last year's acquisition of ABN Amro as part of a consortium led by Royal Bank of Scotland stretched the bank's capital reserves.

Fortis said it expects to sell its stake in ABN Amro at a price below the €24 billion it originally paid but warned anything below €12 billion would damage its core equity.

Each government will take a 49 per cent stake in Fortis banks in their respective countries. Belgium will put in €4.7 billion, the Netherlands €4 billion and Luxembourg €2.5 billion.

In the UK, the government has confirmed that Bradford & Bingley will be nationalised after it was deemed a failure.

However, news from the US that politicians have finally agreed to a bailout deal may boost markets.