Fortis Gets $16.4 Billion In Bailout, Head Of Board Resigns

Amsterdam, Netherlands (AHN) - Fortis NA said on Monday that the governments of Belgium, Luxembourg and the Netherlands invested 11.2 billion euros ($16.3 billion) in the respective branch of the bank in each country.

The market analysts and media reports had speculated that the Dutch-Belgian financial services company was planning to sell itself to shore up its finances.

Speculations emerged after the company lost stock value by 35 percent last week in Brussels trading and that the company was likely to spin off one of its acquisitions.

Over the weekend, Belgian and Dutch regulators began discussing ways to restore confidence in the company and prepared a rescue plan for the bank.

The company could have sold the ABN AMRO Dutch banking business that it took over in 2007 as the financial services group struggles to raise capital to fix its balance sheet.

After the bailout plan was announced, the company said it has decided to sell its interest in ABN AMRO (RFS Holdings) at a price below the acquisition price that would lead to an impairment.

Last year, the firm spent as much as 24 billion euros on ABN Amro Holding NV assets just at the beginning of U.S. subprime mortgage contagion during the summer.

The firm also said that Maurice Lippens will step down from the Fortis Board of Directors. The new Chairman will be recruited from outside the company in consultation with the Belgian government.

In addition, the governments of Belgium, the Netherlands and Luxembourg will receive significant board representation in the respective Fortis banks

The company suffered after its clients withdrew as much as 5 billion euros ($7.30 billion) of their deposits, which may be only 3 percent of its total deposits but the signs of lowering confidence in he company are clear.

Shares of the ninth biggest financial-services firm plunged to a record 20 percent on late Friday after it replaced Herman Verwilst, chief executive officer, with Filip Dierckx head of its banking segment.