Since the credit crunch started over a year ago, dozens of financial institutions – some of them with large wealth management operations – have been taken over, partly or wholly nationalised, or gone into liquidation. A number of states, such as Ireland, Germany, Greece, the UK and Italy, have moved to protect depositors in these banks with public funds. 

WealthBriefing is running a regularly updated list of the casualties of the credit crunch.

The UK:

Bradford & Bingley.

The UK mortgage lender and savings institution, a listed firm, has been taken over by the UK government. Its savings business is to be sold to Spanish bank Santander, which also owns the UK lender Abbey.

Northern Rock.

Like B&B, Northern Rock is a financial institution dating its origins back many decades in the north of England. It was taken over by the UK government in February 2008. Its shares collapsed in value and the bank’s aggressive lending and high-yield savings policy became unstuck because it was funding a considerable portion of its lending via the short-term commercial paper market, which spiked in price during the summer and autumn of 2007. Its total debt obligations of around £100 billion have been added to the UK public debt for accounting purposes.

HBOS.

The bank has agreed to be taken over by Lloyds TSB in a $22.2 billion deal. HBOS’s business includes Insight Investment, the asset management firm. Lloyds operates a private banking arm.

Dawnay Day.

The conglomerate, including hedge fund and commodity trading businesses, called in administrators due to a cash crisis. Since then, a number of its affiliate businesses have severed connections to the parent firm.

The US:

Freddie Mac, Fannie Mae. These two organisations - to use their popular Wall Street nicknames - were government-backed agencies that stood behind the mortgages of about half of the $12 trillion US mortgage market. They were nationalised in early September following growing fears that their collapse would paralyse the US financial system. Some critics argue that these agencies, because they were ultimately supported by the US government anyway, encouraged lax lending policies that have contributed to the current market bust.

AIG, or American International Group, was saved from collapse in September by accepting an $85 billion federal loan. The US government has acquired a majority stake in AIG in what is effectively a debt-for-equity swap. AIG operates a substantial private banking business in jurisdictions including Switzerland. The firm has also announced it intends to offer clients of one of its funds the option to switch to another one.

Washington Mutual.

The takeover of the deposit-taking institution, based in Seattle, came after the largest bank failure in US history. JP Morgan Chase has bought the bank for $1.9 billion. Washington Mutual has total assets of $307 billion.

Merrill Lynch.

A household name with a large wealth management advisory arm and thousands of private client brokers, Merrill was one of the largest credit crunch victims. It has agreed to be bought by Bank of America in a $50 billion deal. As BoA does not have much of a wealth management presence outside its domestic market, the deal is not thought by analysts to be bad news for wealth managers at Merrill.

Bear Stearns.

One of the first big names to go, Bear Stearns, which had been building a smart new European HQ in London’s Canary Wharf, was bought by JPMorgan Chase in March with a $30 billion lending facility from the Federal Reserve. Initially, the purchase price of Bear was at a massive discount but later increased. Bear suffered heavy losses in its credit hedge funds in 2007.

Wachovia.

Wells Fargo is to buy Wachovia following a legal tussle involving Citi. Citi, which had agreed to buy this bank in early October, became embroiled in a legal dispute with Wells Fargo and Wachovia, suing the banks for $60 billion, after the latter two banks agreed to a $15.1 billion takeover of Wachovia by Wells Fargo. Citi claimed it signed an exclusivity agreement with Wachovia and had already provided that bank with liquidity at the time when Wells Fargo and Wachovia suddenly signed an agreement. However, the Wells Fargo/Wachovia deal has now gone through. All three banks have substantial wealth management business.

Lehman Brothers.

Once the fourth-biggest US investment bank, it filed for bankruptcy in September. Its North American operations are to be bought by Barclays, although still subject to approval at the time of writing. The bankruptcy threatens to destroy or reduce the value of structured products sold by Lehman to wealth management clients.

Continental Europe:

Switzerland:

The Swiss government and the Swiss National Bank, has helped to take up to $60 billion of toxic debt off UBS’ balance sheets. The state aid for UBS has turned large bonus payments for UBS executives in recent years into a hot political issue in Switzerland. UBS has been one of the heaviest casualties of the credit crunch, taking a total of $43 billion in credit write-downs.

Fortis.

In an embarrassing volte face for the Dutch-Belgian group, Fortis has been part-nationalised by three European states and has also planned to sell off the ABN Amro business it acquired less than 12 months before. The ABN Amro businesses include a large private client operation. When Fortis acquired the private wealth business of the Dutch bank, it more than doubled its private wealth assets under management. A number of Fortis units in Belgium and Luxembourg, meanwhile, have been sold to French bank BNP Paribas.

Dexia.

The governments of Luxembourg, Belgium and France have injected €6.4 billion into the bank, which specialises in local government lending, to prevent its collapse.

Iceland:

A number of Icelandic banks have been rescued while savers in UK-registered Icelandic banks have been protected. The Irish government paid €600 billion ($869 million) for a 75 per cent share in Glitnir Bank. Meanwhile, UK depositors in Kaupthing Singer & Friedlander and Landsbanki have also been protected by the UK after problems at these banks.

Kaupthing Singer & Friedlander has been put into the hands of receivers Ernst & Young. There is a wealth management business within Kaupthing Singer & Friedlander, which WealthBriefing understands was in the process of being renamed Kaupthing Wealth.