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There was a predictability about the demise of Bradford & Bingley, but the problems that surfaced over the weekend at Fortis, Belgium's largest bank, are of an altogether different scale.
The writing was on the wall for B&B, the former building society when private-equity house TPG withdrew its offer of support after having made so much in the first place of its riding to the rescue. TPG never said what made it change its mind, but it must have been something pretty serious for it to be indifferent to upsetting the government, the shareholders and almost everyone else that counted.
Though B&B eventually got a rights issue away to shore up its balance sheet, confidence in its management was shot. No one was ever convinced that they really understood what was happening in, and indeed happening to, their business. This weekend time ran out.
One can see too why no British bank wanted to take B&B on. Lloyds TSB bravely stepped into the breach with HBOS and its shares have been on the skids ever since. What the market is saying is quite clear.
The HBOS deal will not go through at the negotiated price. It it goes through at all it will be with Lloyds paying virtually nothing for the HBOS equity. It is a sign of how fast things are moving that two weeks ago a valuation of zero was unacceptable, but today it looks like a pretty generous offer.
Fortis is in a different league. Just a year ago it was one of the trio, along with Royal Bank of Scotland and Santander of Spain, which emerged triumphant from the battle for ABN Amro.
Shareholders in that Dutch bank must now count themselves among the luckiest in the world for however much they may not have wanted to be taken over they were taken out right at the top of the market and on a valuation for banks which we are unlikely to see again for decades.
Meanwhile Fortis, as was pointed out here last week, is one of those banks which, thanks to a heavily geared balance sheet, dwarfs the country in which it is based. Its liabilities are three times the gross domestic product of Belgium.
But now Fortis has buckled. It has been brought low not so much by the price it paid for its slug of ABN Amro — a slug, incidentally, which it has still not formally collected from Royal Bank of Scotland, which detail may or may not cause some concern in Edinburgh. But once again the real culprit seems to be the usual mix of toxic exposures of American origin.
Neil Woodford, of the Henley-based Invesco Perpetual fund management operation, who has not owned a bank share for years, last week said that he would still not be a buyer because banks were surrounded by a fog.
It was impossible from the outside, he said, to see how much of their asset base was impaired, how dependent they might be on wholesale as opposed to retail funding, and the extent to which they might be exposed to the second stage of this downturn, when the losses spread out into the real economy.
He is probably right. But, on the other hand, after this weekend's turmoil in Europe and America there cannot be many weaklings left that have not already been flushed out.
A lesson from the Church
The Archbishop of Canterbury came under fire last week for his attack on the morality of short selling, which was perhaps to be expected, but one line of attack did seem a little unjust to anyone with a knowledge of recent history.
The theme was that if funds under the control of the Church Commissioners had been invested more professionally and aggressively in recent years, returns would have been higher, leaving the Church in a better position to finance its activities and maintain its estate.
This is exactly the attitude the Church Commissioners themselves took in the early 1970s when they became one of the most aggressive and ambitious pools of funds in the City.
Unfortunately, when economic conditions changed, they found with their new and profitable investment ideas that what was new was not profitable and what was profitable was not new — a lesson we are re-learning in the markets at the moment.
Being swept up in the latest investment fashions proved utterly disastrous for the Commissioners. Its fund managers lost what in those days was a fortune and the depletion of the Church's funds was one reason in succeeding years why it could not maintain so many churches, or rectories or country livings.
So one can quite understand why this Archbishop, and his recent predecessors, have a reluctance to go down this road again.
