Deal on Dexia Bank reached
Source: Bloomberg News |
October 10, 2011, Monday
|
Print Edition
Print Edition
FRANCE and Belgium reached an accord on Dexia Bank SA, paving the way for a dismantling of the French-Belgian bank.
"The suggested solution, which is also the result of intense consultations with all partners involved, will be submitted to Dexia's board of directors for approval," Belgian Prime Minister Yves Leterme and French Prime Minister Francois Fillon said in a joint statement yesterday. Details weren't disclosed.
While France and Belgium rushed to protect their local units, they wrestled over responsibility for assets hit by the crisis that caused the bank's short-term funding to evaporate. Dexia's troubled assets are being folded into a "bad bank" and could amount to as much as 190 billion euros (US$254 billion), according to Bloomberg News calculations based on company reports.
Rescuing Dexia - the first victim of the debt crisis at the core of Europe - has become critical to preventing contagion in the region's banking industry. Dexia's balance sheet, with total assets of about 518 billion euros at the end of June, is about the size of the entire banking system in Greece and larger than the combined assets of financial institutions bailed out in Ireland in the last 2 1/2 years.
"Dexia is not an isolated problem," said Cor Kluis, an Utrecht, Netherlands-based analyst at Rabobank International who rates Dexia "reduce." "The question for all investors in Europe is how politicians are going to handle this, and what they want to see is a coordinated and professional solution. That would be a good opportunity to restore calm."
Paris- and Brussels-based Dexia has retail branches in two European Union founding nations - Belgium and Luxembourg - and is a former world leader in municipal lending.
French weekly Le Journal du Dimanche reported yesterady that France and Belgium may have agreed on splitting the burden of Dexia's bad bank, which will hold 120 billion euros of risky US, Italian, Spanish, and Belgium loans.
Dexia dropped 17 percent in Brussels Thursday before being suspended, and will resume trading today. The stock fell 42 percent last week on concern that the breakup will leave shareholders with little of value. It has plunged more than 90 percent since a 2008 bailout.
"The suggested solution, which is also the result of intense consultations with all partners involved, will be submitted to Dexia's board of directors for approval," Belgian Prime Minister Yves Leterme and French Prime Minister Francois Fillon said in a joint statement yesterday. Details weren't disclosed.
While France and Belgium rushed to protect their local units, they wrestled over responsibility for assets hit by the crisis that caused the bank's short-term funding to evaporate. Dexia's troubled assets are being folded into a "bad bank" and could amount to as much as 190 billion euros (US$254 billion), according to Bloomberg News calculations based on company reports.
Rescuing Dexia - the first victim of the debt crisis at the core of Europe - has become critical to preventing contagion in the region's banking industry. Dexia's balance sheet, with total assets of about 518 billion euros at the end of June, is about the size of the entire banking system in Greece and larger than the combined assets of financial institutions bailed out in Ireland in the last 2 1/2 years.
"Dexia is not an isolated problem," said Cor Kluis, an Utrecht, Netherlands-based analyst at Rabobank International who rates Dexia "reduce." "The question for all investors in Europe is how politicians are going to handle this, and what they want to see is a coordinated and professional solution. That would be a good opportunity to restore calm."
Paris- and Brussels-based Dexia has retail branches in two European Union founding nations - Belgium and Luxembourg - and is a former world leader in municipal lending.
French weekly Le Journal du Dimanche reported yesterady that France and Belgium may have agreed on splitting the burden of Dexia's bad bank, which will hold 120 billion euros of risky US, Italian, Spanish, and Belgium loans.
Dexia dropped 17 percent in Brussels Thursday before being suspended, and will resume trading today. The stock fell 42 percent last week on concern that the breakup will leave shareholders with little of value. It has plunged more than 90 percent since a 2008 bailout.
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