Bank rescues spread in Europe today after US lawmakers rejected a $700 billion rescue plan for the financial industry.
The Irish Government said today it would guarantee all bank deposits for two years to maintain financial stability amid international market turmoil. However, it is not the only government to intervene to protect banking systems.
Here is a round-up of government bailouts elsewhere over the past fortnight.
BELGIUM, FRANCE, LUXEMBOURG & NETHERLANDS --Belgian, French and Luxembourg governments and shareholders today pledged €6.4 billion for Dexia, the world's largest lender to municipalities, to boost its capital and attempt to restore confidence. Under the plan, Belgian government and other Belgian stakeholders would invest €3 billion, the French government €1 billion and French state-controlled Caisse des Depots (CDC) €2 billion. The Luxembourg government would invest €376 million.
The Belgian, Dutch and Luxembourg governments agreed to inject €11.2 billion into banking and insurance company Fortis yesterday to head off the first major bank crisis to hit the euro zone in 13 months of global financial turmoil. Each government will take a 49 per cent stake in Fortis banks in their respective countries.
BRITAIN --Britain nationalised Bradford & Bingley yesterday, making the buy-to-let mortgage lender the second UK bank to be taken into public ownership this year after Northern Rock. After talks failed to find an outright buyer for B&B, which had suffered badly due to its heavy exposure to the slumping British housing market, the Treasury said it would take over the bank's £50 billion pound mortgage portfolio and sell its deposits and branches to Spanish bank Santander.
DENMARK --Denmark's central bank stepped in to secure liquidity at Ebh Bank on September 22nd, after Ebh cut its full-year profit outlook for the second time in two weeks and sacked its managing director. Ebh did not say how much liquidity it had received, or which Danish banks joined with the central bank in the cash booster.
GERMANY --Yesterday Germany threw a lifeline to cash-strapped lender Hypo Real Estate - which owns Dublin-based public sector lender Depfa Bank, by agreeing to provide the bulk of €35 billion euros in credit guarantees for Hypo, which had been especially vulnerable to the freeze in interbank lending following the Wall Street collapse.
ICELAND --Iceland took control of Glitnir, the island's third-largest bank yesterday. Iceland will buy a 75 per cent stake in Glitnir for €600 million. The bailout followed a sudden deterioration in Glitnir's funding over the
past few days and sent the Icelandic crown skidding to a fresh record low against the euro.
RUSSIA --Russia said on September 18th it could spend $20 billion on equity purchases as part of an emergency state support totalling $130 billion to stem the worst stock market losses in a decade and ease liquidity worries. The package of measures was announced amid rising worries about Russia's banking sector after inter-bank lending almost ground to a halt.
USA --The US Federal Reserve bailed out troubled insurer American International Group Inc (AIG) on September 16th by offering to lend up to $85 billion in a plan aimed at saving the company from a "disorderly failure" that could damage the global economy. Under the two-year facility, the US government will receive a 79.9 per cent equity interest in the insurer.
The Bush Administration asked Congress for $700 billion on September 20, to bail out firms burdened with bad mortgage debt. However, the bailout plan was rejected.