U.S. Financial Aftershocks Spread to Europe

The aftershocks of the U.S. financial crisis have spread to Europe, which is also employing rescue plans for troubled banks.

Unlike Washington, European governments had avoided direct market intervention in the past, but the bigger threat resulting from the U.S. crisis has forced a change of course.

▽ United Kingdom

The British government announced yesterday that it will nationalize mortgage lender Bradford & Bingley, which has greatly suffered from a housing market slowdown.

The bank is expected to become Britain’s second this year to go under the government’s wing, following Northern Rock.

Spanish bank Banco Santander SA will take over B&B’s retail deposit unit, which is in the best shape among the bank’s business lines.

In the wake of the bankruptcy of Lehman Brothers, Halifax Bank of Scotland was acquired by Lloyd’s TSB Sept. 18.

▽ Germany

The Munich-based Hypo Real Estate managed to avoid bankruptcy with the help of the German government yesterday. Berlin rescued the bank at the last minute by allowing the infusion of funds from a consortium of banks.

Hypo, Germany’s second-largest mortgage bank and listed among Germany’s 30 blue chip Dax Index companies, had fallen victim to the financial loss of its German-Irish unit Depfa.

▽ Other regions

Belgium, the Netherlands and Luxembourg will provide 11.2 billion euros to Fortis, a major Belgian-Dutch banking group in the region.

The decision to partially nationalize Fortis was made after European Central Bank President Jean-Claude Trichet, Belgian Prime Minister Yves Leterme and Dutch and Luxembourgian officials held an emergency meeting. The shares of ABN Amro acquired by Fortis last year will be put on the market.

Launched in the 1800s, Fortis is Belgium’s biggest bank and the second largest in the Netherlands.

The Belgium government also moved to rescue Dexia, whose shares fell more than 30 percent yesterday. The Belgian-French banking group Dexia, specialized in providing loans to provincial governments, has faced a managerial crisis since early this year after its share price tumbled 60.67 percent.

pisong@donga.com