European Banking Union C: Cross-Border Resolution–Fortis Group

Yale Program on Financial Stability Case Study 2014-5C-V1

20 Pages Posted: 14 Mar 2015

See all articles by Rosalind Wiggins

Rosalind Wiggins

Yale Program on Financial Stability

Natalia Tente

Deutsche Bundesbank

Andrew Metrick

Yale School of Management; National Bureau of Economic Research (NBER); Yale University - Yale Program on Financial Stability

Date Written: March 12, 2015

Abstract

In August 2007, Fortis Group, Belgium’s largest bank, acquired the Dutch operations of ABN AMRO, becoming the fifth largest bank in Europe. Despite its size and its significant operations in the Benelux countries, Fortis struggled to integrate ABN AMRO. Fortis’s situation worsened with the crash of the US subprime market, which impacted its subprime mortgage portfolio. By July 2008, Fortis’s CEO had stepped down, its stock had lost 70% of its value, and it was on the verge of collapse due to a severe liquidity crisis. The governments of Belgium, Luxembourg, and the Netherlands quickly came together and agreed to inject funding into the bank to keep it afloat. However, the deal fell apart when the Netherlands reversed course and nationalized Fortis’s Dutch assets. As a result, Fortis underwent an uncoordinated resolution, bifurcated along national lines. This case permits examination of this attempt at a cross-border rescue of a failing systemically important financial institution, analysis of why the effort failed, and consideration of how it might proceed differently under current regulations.

Keywords: Systemic Risk, Financial Crises, Financial Regulation

JEL Classification: G01, G28

Suggested Citation

Wiggins, Rosalind and Tente, Natalia and Metrick, Andrew, European Banking Union C: Cross-Border Resolution–Fortis Group (March 12, 2015). Yale Program on Financial Stability Case Study 2014-5C-V1. Available at SSRN: https://ssrn.com/abstract=2577348 or http://dx.doi.org/10.2139/ssrn.2577348

Rosalind Wiggins

Yale Program on Financial Stability ( email )

165 Whitney Avenue
P.O. Box 208200
New Haven, CT 06520-8200
United States

Natalia Tente

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Andrew Metrick (Contact Author)

Yale School of Management ( email )

165 Whitney Avenue
New Haven, CT 06511
United States
(203)-432-3069 (Phone)

HOME PAGE: http://faculty.som.yale.edu/andrewmetrick/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Yale University - Yale Program on Financial Stability

165 Whitney Avenue
P.O. Box 208200
New Haven, CT 06520-8200
United States

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