European shares extended losses in early trading with news of Fortis’ nationalisation hitting the banking sector hard.
It is the first major eurozone bank to buckle in the wake of the global financial crisis.
The Benelux banking and insurance group was taken over on Sunday in an effort to stave off its impending collapse.
The takeover followed emergency talks with European Central Bank President Jean-Claude Trichet.
The presence of the ECB chief – unprecendented in a commercial bank rescue – highlighted the seriousness of concern for the integrity of the euro zone’s financial system.
Defending the move, the Dutch Finance Minister, Wouter Ros, said they acted because “we are convinced Fortis can keep going in these turbulent times.”
“It’s a sound financial institution in which people should entrust their savings,” he added.
Meanwhile, the British government has confirmed that it is nationalising the Bradford and Bingley building society taking control of the company’s mortgage and loan sectors, worth some 75 billion uros.
The Spanish group, Santander, which owns British rival bank, Abbey, has bought the firm’s savings business for around 60-billion.
The crisis has also spread to Germany, where the Hypo mortgage bank has been bailed-out by a consortium of private banks in a re-financing deal worth several billion euros.