European Banking, Fortis, a question

[Blackadder]

My grandparents have about €300,000 on a savings account.

It's on an ABN AMRO account. ABN AMRO is a Dutch regular bank that has been recently bought by a consortium of Royal Bank of Scotland Group, Fortis, and Banco Santander. (for €70 bn)

Fortis looks to be in trouble. (or not,but I have no clue how serious these signs are)

The Dutch central bank guarantees €20,000 and 90% of the next €20,000 (€38,000) if a bank should really collapse. Since €300,000 is significant more, some people seem to advise that you divide your money between several banks.

Should I tell my grandparents to open new accounts at other banks? Or is this all a big scare and is there nothing to worry about.

[Francesca R]

I don't think there is any likelihood of any of those institutions defaulting to depositors at all.

I spread deposit accounts around myself though (deposit insurance in the UK has proven itself to be inadequate and is being reformed, plus it doesn't cover anything I have in foreign currency accounts even through a UK branch relationship). And I did the same for my father a year ago after the Northern Rock situation, persuading him to put a lot in the National Savings Bank (which is the UK government, which will not default). Older generations often baulk at the hassle of this--I suggest you do it for them. Holding government bonds with some of that (large) sum might be an idea too (not investment advice)

[egslim]

The safest Dutch bank is probably the Rabobank, which has a triple A rating and no shareholders.

As far as I know, Fortis got into some trouble because they overpaid for ABN right when credit became a lot more expensive, due to the crunch. But I don't believe for a second Fortis will default. I believe its position is a lot better than that of many other banks, and it is simply too important - especially in Belgium - to be allowed to fail.

[dudalb]

My grandparents have about €300,000 on a savings account.

It's on an ABN AMRO account. ABN AMRO is a Dutch regular bank that has been recently bought by a consortium of Royal Bank of Scotland Group, Fortis, and Banco Santander. (for €70 bn)

Fortis looks to be in trouble. (or not,but I have no clue how serious these signs are)

The Dutch central bank guarantees €20,000 and 90% of the next €20,000 (€38,000) if a bank should really collapse. Since €300,000 is significant more, some people seem to advise that you divide your money between several banks.

Should I tell my grandparents to open new accounts at other banks? Or is this all a big scare and is there nothing to worry about.


Expect to see a LOT of these kind of jitters in the near future.
Fact is, if the US economy goes down a lot of other countries are going to go down with it.

[Blackadder]

Thanks for all the answers.

It is interesting to note that most banks around here are increasing their interest rates on deposits, but that Rabobank (that indeed has a very solid reputation) doesn't do it because people come to them anyway, even if they pay less.

In Holland deposit rates have been going down and down to criminally low figures, because the banks could rely on the laziness of a lot of people.

So if nothing more, this whole thing at least got us evaluating our financial situation and that can only be a good thing.

[egslim]

Thanks for all the answers.
You may find this reassuring: http://www.nrc.nl/economie/article1998763.ece/Top_ABN_Amro_Nederland_wij_zijn_financieel_gezond

Until the end of 2009 ABN Amro will continue to operate as a self-sufficient bank, so even if Fortis defaults before then it won't affect your grandparents.

[balrog666]

News:

Sale or Break-up of Fortis Possible (http://online.wsj.com/article/SB122261727829783427.html?mod=googlenews_wsj)

[Phaedrus74]

It's done.

As of today the Belgian, Luxemburg and Dutch government own a 49% stake of Fortis. ABN-AMRO will be sold for less than half of what Fortis paid for it.

[Blackadder]

They got a 12 Bn bailout, yet the shares crashed another 23% down today. (whole AEX stockmarket down 8,8% the biggest loss since 1987 in Holland )

http://media.timesfreepress.com/img/news/tease/2008/09/24/080924_rescue_plan.jpg


http://www.caglecartoons.com/images/preview/%7B9c6b54ea-0c42-4a68-afcf-71f1b0a263a0%7D.gif

The next one is funny when you are familiar with Fortis ads:

http://www.geenstijl.nl/archives/images/fortiscartoon.jpg

http://www.joscollignon.nl/site/actueel_files/Voorpagina08-09-20.jpg

[Blackadder]

This morning my newspaper opened with the message that the Dutch Government has bought both Fortis and ABN AMRO (Dutch parts) for 16.8 billion euros. So they have become national banks.

[egslim]

Yes, that makes them the safest banks in the Netherlands right now. And probably a fair deal for the government, I expect there'll be a nice profit when the bank is reprivatized a few years from now.

Though the comments about how the Dutch parts are the "healty" parts were rather stupid. I understand Dutch politicians saying it, because they just spent 16.8 billion Euros of taxpayers money on them. But that statement also hit a lot of nerves in Belgium and is causing distrust of Fortis' remaining operations. That's bad.