Credit crisis spreads across Europe, more banks bailed out

Buy an ad on DigitalJournal.com

When the credit crisis in U S took an ugly turn with the collapse of Lehman, European regulators were saying their banks were fundamentally strong. Now, a couple weeks later, they are scrambling to rescue the troubled banks.

Five banks were bailed out by governments in France, U K, Belgium, Netherlands, Ireland and Luxembourg. Fortis, the biggest private employer in Belgium and the largest banking group in Belgium, the Netherlands and Luxembourg was partially nationalized. Other banks to be bailed out were Bradford & Bingley in Britain, Germany's Hypo Real Estate, Ireland's Glitnir Bank, the third largest in the country and Dexia, a French-Belgian lender to local banks.

Overnight, the money lending rates such as Libor and Euribor soared to their highest levels on record making the banks virtually impossible to get money. What makes regulators more worried is that Fortis, the biggest causality so far had a leverage ratio ((assets to equity) of 30 whereas other big banks such as UBS have a much worse leverage ratio at 40.

Many European banks have become too big and internationalized that it has become impossible for their home-country governments to rescue them. Many countries don't have the financial muscle to bail out their banks like in the U.S.