Will Belgium clear the final hurdle? Belgium's leap of faith
Over the past nine months Belgian bankers have been hounded by the idea of a Belgian super-bank. Those who are tired of constant speculation know exactly who to blame.
Last August Daniel Cardon de Lichtbuer, chief executive of Banque Bruxelles Lambert (BBL), advertised his search for a partner capable of lifting BBL out of the regional Benelux market and into the international banking league. "I would like to leave the bank at the end of 1996 having set in motion an alliance with one of the world's banking giants," he said.
It was an attractive idea. A merger between BBL and the nation's largest bank, Generale Bank, would have created an institution with assets of more than Bfr11 trillion ($350 billion) that would have ranked among the world's top 15 banks by assets. This captured the imagination of the local financial community, which tagged the scheme Grande Banque Belge, or GBB for short.
The government is concerned that a single currency will eliminate Belgian banks' business advantage in Belgian francs. "Belgian banks will lose the protection and supremacy the Belgian franc currently gives them," says Elio di Rupo, economics minister.
In Belgium's small economy, trade with neighbouring countries is particularly significant. The banks have traditionally earned well from forex business. At the same time, the Belgian franc is so stable against its main reference currency that there are few opportunities for arbitrage. The Belgian Bankers' Association estimates that Belgian banks will lose between Bfr15 billion and Bfr20 billion from lost foreign exchange commisssions if the single currency is introduced. "We are losing forex earnings and at the same time we have to make investments in systems," says René Myncke, capital markets head at Generale Bank. "So we get hit on both sides."
Finance minister Maystadt is impressed by the Dutch banks' example and points out that ABN Amro, the largest bank in the Netherlands, is as large by assets as five of the largest seven Belgian banks combined. But Ferdinand Chaffart, chief executive of Generale Bank, is unimpressed. "He has this fixation that big is beautiful," he says.
However, the finance minister was probably trying to support Cardon, too. Nine months after his first initiative, it is becoming embarrassing for Cardon that no foreign banks have shown any interest in buying BBL.
At first it seemed BBL would merge with Crédit Communal (CCB), the nationwide savings bank network and 12% shareholder in BBL. But after months of speculation, CCB has decided to link up with Crédit Local de France in a 50:50 cross shareholding arrangement. There are rumours that the CCB shareholding in BBL may be up for sale.
Cardon of BBL had hoped another large foreign bank would be interested in his plan. The prime candidate was another of his major shareholders, ING Bank of the Netherlands. (In fact ING had already made an unsuccessful bid for BBL in 1992.) For weeks there was no sign of activity.
Then in early April a third powerful shareholder revealed that a plan to merge BBL and Generale Bank had been thwarted by ING. Etienne Davignon, chairman of Société Générale de Belgique and thus a 30% shareholder in Generale Bank, made it known that ING refused to accept the plan because it aspired to create a rival to ING.
Bankers in Brussels say the Belgian banks have so many important shareholders, each with different interests, that the GBB plan is impossible. Moreover, cross-holdings in Belgium are so tightly interwoven that any merger plan would attract the attention of the competition authorities.
Enough is enough, says Chaffart of Generale Bank, who is now trying to stamp out further speculation about the bank's future by promising that the bank will go it alone.
It has announced several new schemes to increase the bank's reach. Under the terms of a recent agreement with Belgium's postal service, the bank will market savings and loan products via the 1,800 post offices and the post office will be able to upgrade and broaden its range of financial products. Generale Bank has also bought the Crédit Lyonnais subsidiary in the Netherlands and is looking for a partner in North-Rhine Westphalia in Germany.
