Extra €10 Billion Agreed To Help Dexia
Published in
France, Belgium and Luxembourg, which own Dexia, the lender that is being broken up, have agreed to boost state guarantees to the ailing bank by €10bn to €55bn, it was disclosed on Wednesday, the Financial Times reported. The decision followed Monday’s meeting between Pierre Moscovici, France’s new finance minister, and his Belgian counterpart, Steven Vanackere, in Brussels. The European commission “temporarily approved” the €10bn increase in guarantees “in order to preserve financial stability”. It said would take a final view on whether the move was compatible with EU state aid rules when it had assessed the plan to dismember the bank. Dexia became the most prominent victim of the financial and eurozone crises by having to be bailed out twice in three years. The specialist lender to local authorities has used up almost all its existing guarantees which were granted in October to ease a funding squeeze. Most of the guarantees have been used up in redeeming unsecured loans provided by its former Belgian banking unit. Dexia needs additional guarantees in order to increase collateral following a fall in interest-rate swap contracts. The bank is being dismembered as a condition of its second bailout in October, with a firesale of assets that contributed to net losses of €11.6bn in 2011, after units were sold for below their accounting value. Dexia is expected soon to sign a deal selling Denizbank, its Turkish lender and its most valuable remaining asset, for about €3bn to Sberbank, the Russian lender which outbid Qatar National Bank, after the two entered exclusive talks last month. Read more. (Subscription required.)