Identifier
Created
Classification
Origin
09BRUSSELS249
2009-02-20 17:36:00
UNCLASSIFIED
Embassy Brussels
Cable title:
BELGIUM: PETERCAM CHIEF ECONOMIST SPEAKS OUT ON
how-toVZCZCXRO8369 RR RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN RUEHLZ RUEHNP RUEHPOD RUEHROV RUEHSK RUEHSR RUEHVK RUEHYG DE RUEHBS #0249 0511736 ZNR UUUUU ZZH R 201736Z FEB 09 FM AMEMBASSY BRUSSELS TO RUEHC/SECSTATE WASHDC 8625 RUEATRS/DEPT OF TREASURY WASHDC INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE RUEATRS/DEPT OF TREASURY WASHDC RUCPDOC/DEPT OF COMMERCE WASHDC
UNCLAS BRUSSELS 000249
SIPDIS
STATE FOR EEB/OMA, EUR/ERA, EUR/UBI
TREASURY FOR OASIA/OIC ATUKORALA
E.O. 12958: N/A
TAGS: EFIN ECON PGOV BE
SUBJECT: BELGIUM: PETERCAM CHIEF ECONOMIST SPEAKS OUT ON
FORTIS BANK
REF: BRUSSELS 204
UNCLAS BRUSSELS 000249
SIPDIS
STATE FOR EEB/OMA, EUR/ERA, EUR/UBI
TREASURY FOR OASIA/OIC ATUKORALA
E.O. 12958: N/A
TAGS: EFIN ECON PGOV BE
SUBJECT: BELGIUM: PETERCAM CHIEF ECONOMIST SPEAKS OUT ON
FORTIS BANK
REF: BRUSSELS 204
1. (SBU) This cable should not be posted on the Internet.
2. (SBU) Petercam Chief Economist Geert Noels (protect)
told econoffs on February 19 that worries about Fortis'
health are largely unwarranted, in his opinion. Petercam is
Belgium's largest merchant bank, and has very good contacts
both in the political and the financial world. Noels
stressed that the drain of cash which affected Fortis in late
September-early October of 2008 mainly originated in the
Netherlands, and since the Dutch Government has taken over
Fortis Netherlands' activities, that this is no longer an
area of concern. Furthermore, Noels said, the toxic
assets (which he defined as 'anyone or anything unable to
repay its debt') were no longer with Fortis Bank, but at the
Fortis Holding company, which also holds insurance and other
non-banking assets.
2. (SBU) Noels thought the Government of Belgium (GOB) and
French bank BNP Paribas would finalize their October 2008
deal (whereby BNP would buy, inter alia, 75 percent of Fortis
Bank from the GOB) before the February 28 deadline, thus
creating one of the largest European banks. The near
rock-bottom stock price of the Fortis Holding was completely
irrelevant in this context, he said. Noels believes the GOB
wants to make the sale to BNP because the GOB realizes it is
not qualified to run a bank, and first and foremost, it fears
that two other troubled Belgian banks, KBC and Dexia, would
then also knock on its doors, with the GOB's pockets were not
deep enough to rescue three banks. Furthermore, Fortis
issues are eating up too much of the Government's time, to
the serious detriment of other government business. Noels
said that the possibility of further leakages (e.g., fleeing
depositors) from Fortis Bank could not be excluded, and
therefore "rebranding" the bank through new ownership,
whether BNP Paribas or eventually another banking group, was
essential to both keep current depositors as well as to
attract new ones. Noels pointed out that contrary to U.S.
bankruptcy legislation, when a Belgian Bank goes bust, the
National Bank of Belgium immediately takes over its
operations, i.e. no accounts would be frozen. Finally, Noels
also added that he deplored the shareholders' vote of last
week (reftel),and stressed that most of the 'no' votes came
from abroad, i.e. China and the Netherlands. Furthermore,
the vote of the Board of Directorsis what matters and it
trumps any shareholder vote.
3. (SBU) From a more global perspective, Noels said he
thought that there were really no good commercial banks left,
and warned of the problems facing the City of London, which
had taken up an extraordinary amount of synthetic and other
CDO's which now have proved to be extremely toxic. He
thought the bad bank concept should be worked out at a global
level, perhaps by the IMF, given the global consequences of
the financial crisis. He warned against premature banking
nationalizations, and claimed that pricing to market of the
toxic assets was still impossible since there was no market.
He felt that some more time was needed to determine the price
of these assets (price to market),and that panic was a bad
motivator: 'we are now dealing with issues that will affect
the wealth of our children, and people should set ego and
prestige aside to save the system', he said. He referred to
the Latin American banking crisis of 1980's as an example,
when several US banks were technically insolvent, but
regulators let them grow their way back into solvency.
Regulators should consider this example when thinking about
whether to nationalize banks.
4. (SBU) Noels also denied that some of the regulators had
'not seen this (financial crisis) coming', pointing out that
there had been several reports warning of the imminent
disaster. For some reason, most of these reports
unfortunately got stuck at the political level, he said.
Nevertheless, he felt that a European initiative regarding
rating agencies was inevitable. More specificall, he warned
against politicians 'first overpromising, then
underdelivering'.
BUSH
.
SIPDIS
STATE FOR EEB/OMA, EUR/ERA, EUR/UBI
TREASURY FOR OASIA/OIC ATUKORALA
E.O. 12958: N/A
TAGS: EFIN ECON PGOV BE
SUBJECT: BELGIUM: PETERCAM CHIEF ECONOMIST SPEAKS OUT ON
FORTIS BANK
REF: BRUSSELS 204
1. (SBU) This cable should not be posted on the Internet.
2. (SBU) Petercam Chief Economist Geert Noels (protect)
told econoffs on February 19 that worries about Fortis'
health are largely unwarranted, in his opinion. Petercam is
Belgium's largest merchant bank, and has very good contacts
both in the political and the financial world. Noels
stressed that the drain of cash which affected Fortis in late
September-early October of 2008 mainly originated in the
Netherlands, and since the Dutch Government has taken over
Fortis Netherlands' activities, that this is no longer an
area of concern. Furthermore, Noels said, the toxic
assets (which he defined as 'anyone or anything unable to
repay its debt') were no longer with Fortis Bank, but at the
Fortis Holding company, which also holds insurance and other
non-banking assets.
2. (SBU) Noels thought the Government of Belgium (GOB) and
French bank BNP Paribas would finalize their October 2008
deal (whereby BNP would buy, inter alia, 75 percent of Fortis
Bank from the GOB) before the February 28 deadline, thus
creating one of the largest European banks. The near
rock-bottom stock price of the Fortis Holding was completely
irrelevant in this context, he said. Noels believes the GOB
wants to make the sale to BNP because the GOB realizes it is
not qualified to run a bank, and first and foremost, it fears
that two other troubled Belgian banks, KBC and Dexia, would
then also knock on its doors, with the GOB's pockets were not
deep enough to rescue three banks. Furthermore, Fortis
issues are eating up too much of the Government's time, to
the serious detriment of other government business. Noels
said that the possibility of further leakages (e.g., fleeing
depositors) from Fortis Bank could not be excluded, and
therefore "rebranding" the bank through new ownership,
whether BNP Paribas or eventually another banking group, was
essential to both keep current depositors as well as to
attract new ones. Noels pointed out that contrary to U.S.
bankruptcy legislation, when a Belgian Bank goes bust, the
National Bank of Belgium immediately takes over its
operations, i.e. no accounts would be frozen. Finally, Noels
also added that he deplored the shareholders' vote of last
week (reftel),and stressed that most of the 'no' votes came
from abroad, i.e. China and the Netherlands. Furthermore,
the vote of the Board of Directorsis what matters and it
trumps any shareholder vote.
3. (SBU) From a more global perspective, Noels said he
thought that there were really no good commercial banks left,
and warned of the problems facing the City of London, which
had taken up an extraordinary amount of synthetic and other
CDO's which now have proved to be extremely toxic. He
thought the bad bank concept should be worked out at a global
level, perhaps by the IMF, given the global consequences of
the financial crisis. He warned against premature banking
nationalizations, and claimed that pricing to market of the
toxic assets was still impossible since there was no market.
He felt that some more time was needed to determine the price
of these assets (price to market),and that panic was a bad
motivator: 'we are now dealing with issues that will affect
the wealth of our children, and people should set ego and
prestige aside to save the system', he said. He referred to
the Latin American banking crisis of 1980's as an example,
when several US banks were technically insolvent, but
regulators let them grow their way back into solvency.
Regulators should consider this example when thinking about
whether to nationalize banks.
4. (SBU) Noels also denied that some of the regulators had
'not seen this (financial crisis) coming', pointing out that
there had been several reports warning of the imminent
disaster. For some reason, most of these reports
unfortunately got stuck at the political level, he said.
Nevertheless, he felt that a European initiative regarding
rating agencies was inevitable. More specificall, he warned
against politicians 'first overpromising, then
underdelivering'.
BUSH
.