America’s biggest bank rescue
NZPA-Reuter Chicago The largest rescue in United States banking history has been put into place for Continental Illinois, and the bank has begun a world search for a partner to bail it out of financial difficulties. Federal regulators and private American banks expanded their aid package to Continental Illinois on Thursday, the eighth largest American banking group, to credits worth SUS 7.3 billion.
"This is unprecedented as far as magnitude," a spokesman for the Federal Reserve Board, the United States central bank, said in Washington.
The Continental Illinois chairman. Mr David Taylor, said the bank’s search for a merger partner was expanding to include the 50 largest banks in the world.
A merger was not inevitable for the bank, he said, which, according to banking sources, was exposed because of loans to the deflated energy industry. "We are working on a number of programmes for injection of capital." he said.
Early trading of the bank’s shares was suspended on the New York stock market on Thursday.
Continental Illinois has been hit by several problems recently In the last year, several of its large depositors have withdrawn substantial amounts and its share price has tumbled from more than SUS 22 to little more than $ll. Last week-end, a group of 16 major United States banks agreed to extend a $4.5 billion emergency line of credit to Continental Illinois. Banking authorities said that an emergency pool of funds had been replaced with a new $5.3 billion line of credit put up by 24 major U.S. banks. “We feel the action, combined with the bank’s existing capital of $2.2 billion, will give the bank plenty of time to develop any longerterm plans that are necessary,” the U.S. Comptroller of the Currency. Mr Todd Conover, said in a statement.
Continental Illinois’ problems were caused largely by financial market rumours and speculation that the bank was in serious trouble, he said. Mr Taylor said market rumours which had plagued the bank were baseless. “We have been aggressively fighting rumours, attempting to change attitudes about the bank, reassuring customers and depositors. and have established a broad-based funding facility from major United States banks." The bank’s directors had decided not to declare its regular quarterly dividend on common shares which would have been payable on August 1. he said. The bank last paid a 50c dividend.
A spokesman for the Federal Deposit Insurance Corporation (F.D.1.C.), which insures bank accounts to protect depositors, said the F.D.I.C. along with the “Fed” and the U.S. Comptroller of the Currency, had assembled the aid package with help from the group of leading U.S. banks.
In a statement, designed to end a crisis of confidence over the bank and reassure financial markets about its future, the F.D.I.C. said: “As part of the over-all programme, and in accordance with customary arrangements. the Fed is prepared to meet any extraordinaryliquidity requirements of the Continental Illinois bank during this period.
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Press, 19 May 1984, Page 21
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489America’s biggest bank rescue Press, 19 May 1984, Page 21
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