Dexia dismantled
October 10, 2011
The Belgian government is to take over the Belgian arm of the ailing Franco-Belgian Dexia bank. The bank accepted the offer after a marathon meeting early on Monday morning.
Belgian Prime Minister Yves Leterme said the move would "make secure" the retail bank inside Belgium and free it from "any risks resulting from the environment within parent body Dexia SA."
Belgian Finance Minister Didier Reynders said the government had offered 4 billion euros ($5.4 billion) to buy out Dexia Belgium.
"With this agreement the wish of the Belgian government is not to remain indefinitely in [control of] its bank nor to leave rapidly but to ensure its continuity," Reynders told a news conference.
On Sunday, the governments of France, Belgium and Luxembourg agreed to dismantle the troubled bank, which is only the second financial institution to require rescue in the wake of the eurozone debt crisis that began in Greece. The three countries will provide a total of 90 billion euros in guarantees for up to 10 years.
The Dexia board is now negotiating with two French banks to help ensure the financing of French local authorities, in which Dexia is highly involved.
More banks at risk
With several French banks taking hard hits on the markets, Paris wants to tap the eurozone's 440-billion-euro bailout reserve to shore them up, but Berlin has said the fund should only be used as a last resort.
Ireland estimated over the weekend that European banks may need more than 100 billion euros to withstand the debt crisis.
The rescue of Dexia, which has global credit risk exposure of $700 billion, came as the leaders of French and Germany agreed in a joint press conference that European banks needed to be recapitalized.
Author: Darren Mara (AFP, Reuters, AP)
Editor: Michael Lawton