The Belgian authorities are expected to announce a third bailout for the banking and insurance group KBC tomorrow amid speculation that it has lost up to €4bn (£3.6bn) on complex financial instruments.
Anxiety about the deepening woes at KBC unsettled stockmarkets today and served as a reminder that some banks are still fragile despite improving confidence in the financial system.
Shares in KBC were suspended after "wild rumours" circulated about its losses on collateralised debt obligations (CDOs), the complex financial instruments at the heart of the credit crunch. The Belgian group said it did not want to make a statement before its first-quarter results are released tomorrow morning.
But the Belgian finance minister, Didier Reynders, was quoted by Reuters as saying: "We have already intervened here to reinforce the [bank's] capital with [funds from] the region of Flanders. We are now looking to take into account the risk of loss on certain products. The goal is again to ensure no saver gets into difficulty."
The group has already received €5.5bn in two injections of aid from the federal and the Flemish authorities. The Belgian business paper De Tijd suggested three scenarios were being considered: a "first loss", where KBC took the first tranche of the loss; a government guarantee for the CDOs; or some sort of insurance for the CDOs. KBC provides banking and insurance to retailers, small and medium-sized enterprises and private clients, and is best known in Belgium, central and eastern Europe. It also employs more than 100 people in the City at the stockbroker KBC Peel Hunt.
As the markets awaited details of KBC's losses, the chairman of the troubled Irish group Allied Irish Banks, Dermot Gleeson, was pelted with eggs at a shareholder meeting called to accept a €3.5bn injection of capital from the Irish government.
Gleeson, who is leaving in July after six years with the bank, told investors that the bank had made poor lending decisions that had forced it to hand a 25% stake to the government in return for funds.
He was sprayed by eggs that were reportedly thrown by Gary Keogh, a 66-year-old pensioner who lost €18,000. "The whole board should be replaced by Mickey Mouse and Donald Duck," he said.
After being ejected, Keogh said: "I hit Gleeson. I hit the microphone and it sprayed over him. Unfortunately I missed Eugene Sheehy [the chief executive]."
AIB, Ireland's largest retail bank, needed government aid after losing €4.3bn on bad loans, largely to property firms. Gleeson told the stormy meeting: "I regret some of the lending decisions … Most of all, I regret the impact of those decisions on our shareholders, our customers, our staff."
Shareholders were unmoved by the apology. Keogh said: "If we didn't live in a tolerant society, the chairman and the rest of the board would be hanging by their necks with piano wire out on the road."