LONDON, Sept 30 Europe's top banks slumped on
Tuesday after U.S. lawmakers rejected a $700 billion bailout
plan for the financial industry in a shock vote and Dexia
(DEXI.BR) became the latest bank to need a big bailout.
By 0715 GMT the DJ Stoxx European bank index .SX7P was
down 3.4 percent at 251.4 point, just above a 2-month low. The
drop was not as steep as some had forecast, which one dealer
said was due to an 8 percent fall on Monday and hopes the U.S.
rescue plan can be revived.
The biggest fallers included KBC (KBC.BR), down 18 percent,
and Royal Bank of Scotland (RBS.L) and HBOS HBOS.L which both
fell 12 percent. UBS UBSN.VX, Lloyds TSB (LLOY.L), Unicredit
(CRDI.MI) and Credit Agricole (CAGR.PA) all fell over 5 percent.
Irish banks surged, however, in marked contrast to the rest
after the Irish government announced it will guarantee all bank
deposits for two years. Allied Irish (ALBK.I) was up 19 percent.
"The domino effect of bank failures has started and is now
spreading to Europe, just look at Fortis FOR.BR and Dexia,"
said Sebastien Barthelemi, analyst at Louis Capital Markets in
"For a long time, we feared the systemic risks, now we're
watching the dominos collapse one after another. It's scary," he
U.S. and Asian stocks tumbled after the U.S. bailout plan
was rejected. [nLU78347]
"The failure of the U.S. Congress to approve the Paulson
plan was not in the script. There were many things wrong with
this plan, but it was the only one on offer and it did help the
situation," said Gerard Lyons, chief economist at Standard
Chartered. "A deep and long U.S. recession should not be ruled
Belgian-French group Dexia received a 6.4 billion euro
capital injection from Belgium, France, Luxembourg and key
investors, following several big state bailouts for banks on
Monday and adding to fears that more rescues or bank failures
will be seen, dealers said. [nLU99270]
Dexia shares were suspended but rival Fortis, which was part
nationalised on Monday, fell 4 percent after ING ING.AS said
it would not buy its ABN AMRO Dutch business.
(Reporting by Steve Slater in London and Blaise Robinson in
Paris; Editing by Quentin Bryar)