Global markets fall on banking woes
Stockmarkets around the world today have fallen sharply after it emerged that the UK’s largest buy-to-let lender, Bradford & Bingley (B&B), is to be nationalised.
The FTSE 100 index closed down 269.7 points to 4818.8, a fall of 5.3% and its eighth worst one-day percentage loss ever.
Shares in Barclays, RBS, Lloyds TSB, HBOS fell 8%, 19%, 12% and 15% respectively.
Under the B&B agreement, the Government will take control of B&B’s £50 billion mortgages and loans. Meanwhile, Spanish bank, Santander, which recently agreed to buy Alliance & Leicester, is to acquire B&B’s £20 billion savings base and its network of 197 branches.
The news of B&B’s nationalisation comes as Lloyds TSB is in the process of acquiring HBOS and Nationwide is to take over smaller building societies Derbyshire and Cheshire.
Meanwhile, across the Atlantic, the Dow Jones industrial average fell by over 300 points to 10830, a fall of nearly 3%.
Wachovia saw its share price plummet 90% after it agreed to a rescue takeover by the world’s largest bank, Citigroup.
The US is in turmoil over concerns of the $700 billion (£380 billion) bailout plan. An agreement was finally reached today and US Congress is preparing to vote to pass the bill and calm the markets.
The deal will effectively give Mr Paulson $350 billion immediately to start buying toxic mortgage-related assets, while the second $350 billion will have to be approved by Congress.
Meanwhile, Belgian-Dutch financial group Fortis has been partially nationalised after concerns were raised about its future health over the weekend.
The Governments of Belgium, Luxembourg and the Netherlands are to invest a total €11.2 billion (£8.9 billion) in the respective Fortis bank institutions in each country. Each Government will take a 49% stake in Fortis.
The rescue comes after no serious bidder could be found for the whole of the Fortis group.
Meanwhile, it has been announced today that Iceland’s third largest bank, Glitnir, has been nationalised after it faced short-term funding problems.
It is the first bank in the country to be nationalised since the start of the credit crunch.