Belgian banks warned over ‘control’ pact

Date: 11/07/1996

LEADING shareholders in Belgium's third largest bank risk fines for concerted behaviour unless they radically amend an agreement signed only ten months ago.

Investigators at the European Commission are drawing up proposals to separate the commercial activities of Banque Bruxelles Lambert (BBL) and Crédit Communal de Belgique (CCB) - which holds 7&percent; of BBL's shares.

Last week, Groupe Bruxelles Lambert (GBL), Royale Belge, CCB and its subsidiary Banque Internationale à Luxembourg (BIL) formally replied to a Commission letter warning them against a control pact they signed in September last year.

The agreement of these parties, who together hold 37.25&percent; of the shares of BBL, is unusually tight and has its own 'strategic committee' to oversee the interests of the shareholders within the bank. Swiss insurer Groupe Winterthur is considering joining the pact, which would lift its influence up to 45.55&percent; of BBL's equity.

Once the accord was signed, the companies applied to the Commission for exemption from the strictures of Article 85 of the Treaty of Rome, which bans agreements from preventing or distorting competition.

Concerted agreements can be exempted if they help the economy and consumers in some way, and do not hinder competition.

Competition Commissioner Karel Van Miert is, however, unhappy with the deal. On 4 June, he wrote to the shareholders warning the accord could lead to strategic coordination between CCB and BBL and restrict the Belgian banking market.

The letter cautioned against alleged suggestions in the pact that BBL would restrain its commercial policy so as not to undermine the interests of CCB. At the same time, CCB may be tempted to avoid aggressive competition with BBL since this would harm its investment.

“Nobody will be surprised to learn that the parties have stuck to their guns,” said Van Miert last week.

In their reply, the control pact members argue that BBL's internal statutes would place an automatic limit on the levels of cooperation with CCB in the commercial field. They point out that the products the two banks offer savers differ markedly, as do their rates of return.

Moreover, they pledge that the strategic committee simply aims to guard shareholders' interests and has no role to play in the management of the bank.

Van Miert is unimpressed and has called for immediate discussions with the parties to amend or terminate the accord.

If the shareholders fail to meet the Commission's requirements, they could in theory be fined up to 10&percent; of their turnover - the first time this would have happened in the banking sector.