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

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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.

Suggested Citation

  • Metrick, Andrew, 2019. "European Banking Union C: Cross-Border Resolution-Fortis Group," Journal of Financial Crises, Yale Program on Financial Stability (YPFS), vol. 1(3), pages 150-171, March.
  • Handle: RePEc:ysm:ypfsfc:1399
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    File URL: https://elischolar.library.yale.edu/cgi/viewcontent.cgi?article=1030&context=journal-of-financial-crises
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    Keywords

    Fortis Group; Belgium; Global Financial Crisis; Resolution; ABN Amro; Netherlands; ECB;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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