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Thursday, 2 July 2009

A good reason not to be Belgian

In October last year KBC, the Belgian bank, not the Kentucky Burnt Chicken fast food chain, went to the government for a bail-out. Belgium is a small country (or should that be 2 small countries and KBC concntrates on the northern one), so €3.5 billion seemed to be about right.

Only it wasn't because they had to go back in January and ask for another €2 billion, which the government provided. KBC made a net loss of €2.5bn in 2008 after writing down its extensive portfolio of toxic CDOs. “Some kind of loss relating to CDOs was expected,” according to Ivan Lathouders, analyst at Bank Degroof, “but the size of the figure now looks to be higher than what we had forecast.” Apparently so.

Then in May, KBC went back to the government to secure further guarantees for toxic assets, to which they duly agreed.

Now we hear that André Bergen, chief executive, asked to leave after undergoing heart surgery six weeks ago, which would have been around the time of the government bailout. He will be replaced by Jan Vanhevel, a KBC veteran who currently oversees the Eastern Europe business.

So let me understand this. Having bankrolled the company twice, and the chief executive having been, or about to go, under the surgeon's knife for a dodgy ticker, the Belgian government agreed to stand behind all KBC's shoddy lending without demanding a new chief executive? Are these guys regulated?

John 11:35.

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