Dexia Exempted From EBA Capital Demand on Restructuring Plan

Dexia SA, the French-Belgian lender that’s being broken up, said it won’t have to comply with capital rules set by the European Banking Authority because it’s planning to “radically shrink in size,” Bloomberg reported. The EBA, Europe’s banking regulator, said today that Dexia would need to raise 6.3 billion euros ($8.4 billion) by mid-2012 to reach a 9 percent target for core Tier 1 capital after markdowns of sovereign-debt holdings, a figure the company said shrank to 4.2 billion euros after the Belgian government’s takeover of Dexia Bank Belgium SA on Oct. 20. In any event, the company’s break-up plan means it will be exempt. Dexia put its banking units in Luxembourg and Turkey (DENIZ), its asset-management division and a 50 percent stake in a custody joint venture with Royal Bank of Canada up for sale to reduce the need for regulatory capital. The lender also obtained government guarantees on as much as 90 billion euros of loans and bonds, which still need to be approved by the European Commission. Read more.