Belgium's economy fell back into recession at the end of 2011, reversing the strong growth it had seen in the first half of the year as the country became the latest to fall victim to the euro zone's twin fiscal and banking crises, The Wall Street Journal reported. Preliminary data released by the central bank on Wednesday showed the economy contracted on a quarterly basis for the second straight quarter in the final three months of 2011.

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.

Dexia SA, the Belgian-French bank navigating a government-orchestrated dismantling, Wednesday booked a EUR4.1 billion ($5.6 billion) loss on the sale of its Belgian subsidiary and a EUR2.3 billion loss on its holdings of Greek sovereign debt, Dow Jones Daily Bankruptcy Review reported. Dexia didn't report third-quarter earnings because of the break-up, which will see the bank's public finance business sold to French savings banks and other businesses sold off once buyers are found.

For the first time, the estimated 700 financial industry lobbyists working in Brussels can now expect to meet with some resistance. Though extremely outnumbered, the new organization Finance Watch is preparing to confront them head-on -- with a former industry insider at its helm, Spiegel Online reported. Indeed, some things will take getting used to in the offices Finance Watch has just leased near the building housing the European Parliament in Brussels. The project is backed by 40 European organizations, including unions, consumer-protection groups, foundations and think tanks.

Dexia, the stricken Franco-Belgian lender that has been at the centre of recent market turmoil, loaned €1.5bn of fresh capital to its two largest institutional shareholders which then used the cash to buy Dexia shares before 2008, the Financial Times has learnt. The unorthodox funding move, which raised the Belgian regulators’ concerns at the time, amounted to Dexia borrowing money from itself to finance a capital increase. This is illegal in most jurisdictions and is now banned in the European Union, but did not break Belgium’s existing laws.

European competition authorities on Monday gave temporary approval to Belgium's nationalisation of Dexia's Belgian unit under a rescue plan of the Franco-Belgian banking group, Agence France-Presse reported. The European Commission gave the Belgian government six months to provide a new restructuring plan for Dexia Bank Belgium, saying it was too soon to determine if the 4.0-billion-euro acquisition complies with EU state aid rules. "The Commission acknowledges that the measure is necessary to preserve financial stability," the European Union's executive arm said in a statement.

An autopsy of Franco-Belgian lender Dexia shows how funding and solvency are intertwined, highlighting the dangers facing other banks if the eurozone sovereign debt crisis is not resolved soon, International Financing Review reported. There are scores of financial institutions for whom wholesale funding markets are shut and who would be bust were it not for the European Central Bank pumping billions of unlimited liquidity into the system.

Europe's banks expect to be told to raise more capital under a Franco-German effort to solve the euro zone debt crisis after the state rescue of Franco-Belgian lender Dexia SA, Reuters reported. Dexia agreed to the nationalisation of its Belgian retail bank and secured 90 billion euros (£78.4 billion) in state guarantees, in a rescue that raises pressure on other euro zone countries to strengthen their banks.

Trading in Dexia's stock was suspended Thursday as governments and the bank's management scrambled to figure out what to do with the Franco-Belgian lender, The Wall Street Journal reported. It has been clear for days that the bank would have to be broken up, given its heavy exposure to Greek and Italian sovereign debt—a factor that has made other financial institutions wary of lending to Dexia. But details of the plan have yet to be agreed upon.

France and Belgium rushed to the aid of Dexia SA on Tuesday, in what will be the first state rescue of a European bank in the euro zone sovereign debt crisis, Reuters reported. The lender to hundreds of French and Belgian towns, which also needed propping up after the 2008 financial crisis, will see its French municipal finance arm broken off and put under the ownership of French state banks.