The belgian state as an institutional investor

The aim of this paper is to analyze the influence of the Belgian State as an institutional investor, especially since the beginning of the current financial crisis. Indeed, the financial crisis induced a raise of the State involvement in financial companies and other companies. In Belgium, 20 milliards euros were devoted to rescue the three biggest financial groups. In the rest of the world, similar operations were also run, in some cases, for bigger amounts.

In Belgium, the Federal Holding and Investment Company is in charge of managing the federal government's shareholdings. At the regional level of power, the Walloon Region is the majority shareholder of the Wallonia Regional Investment Company. The Brussels-Capital Region, for its part, holds the major part of the Brussels Regional Investment Company whereas the Flemish Region acts through the Flanders Regional Investment Company.

The Federal Holding and Investment Company has three core missions.

Firstly, it invests in sectors considered as important by its investment charter (Investment missions). Our analysis shows that only a part of the companies in which the Federal Holding and Investment Company invests, belongs to a priority sector.

Secondly, it invests in public and private companies which are considered as strategic (Public Holding). Once again, only a part of companies present in the portfolio of the Public Holding of the Federal Holding and Investment Company is in line with the objective of this mission.

Finally, it acquires shareholdings on behalf of the federal State which wants to realize specific investments (Delegated Tasks). Most of these investments are related to the financial crisis as we show in the article.

In order to analyze the influence of the Belgian State as an institutional investor, we focus on the companies the State invests in, their strategic nature, their sector, their rentability and the duration of the State’s shareholding, on the basis of the annual reports of the Federal Holding and Investment Company. Moreover, we also analyze the annual reports and financial statements of companies in which the State is a shareholder.

In this paper, we also analyze the European legislation about State aids. Therefore, we examine the Treaty on the fonctioning of the European Union and its articles about aids granted by States (articles 107, 108 and 109). Indeed, acquisition of holdings by State members of the European Union can be forbidden. Nevertheless, Belgium provided assistance in the rescue of Dexia, Ethias, Fortis and KBC with the approval of European Union. So, it seems that the European legislation on State aids cannot prevent States from helping companies in difficulty.

In conclusion, it appears that States can be considered as institutional investors whose importance must not be underestimated. Indeed, State intervention sometimes constitutes a less expensive choice than abstention and is a common practice especially during economic crises.