(Updates with attempts to reach bank, government in last paragraph.)
Oct. 17 (Bloomberg) -- The European Commission opened an in-depth probe into Belgium’s takeover of Dexia SA’s local consumer-lending unit while granting temporary approval for the rescue.
Dexia will be broken up after Belgium agreed earlier this month to pay 4 billion euros ($5.5 billion) for the Belgian retail banking division and to guarantee 60 percent of a so- called bad bank to be set up for Dexia’s troubled assets.
EU regulators said their probe will check whether the price paid for Dexia Bank Belgium includes a state subsidy and whether the aid meets EU rules. The Brussels-based commission approved the payment pending the result of the investigation saying it “acknowledges that the measure is necessary to preserve financial stability,” it said in an e-mailed statement from Brussels today.
Regulators must approve the terms for government rescues of banks and has required banks to sell off assets to compensate for the state support. Belgium has to submit a restructuring plan for the bank within six months that shows “adequate burden sharing by all involved of the restructuring costs” and “sufficient measures” to compensate for the distortions of competition, the commission said.
Dexia will sell assets, including its Luxembourg unit and its French municipal lending arm, to give the bad bank capital to absorb future losses. The bank has said further asset sales are likely, including Denizbank AS of Turkey and Dexia’s fund- management division.
Call and e-mails to Dexia’s Brussels press office and the Belgian government press office weren’t immediately returned after the EU announcement.
--Editors: Peter Chapman, Anthony Aarons
To contact the reporter on this story: Aoife White in Brussels at firstname.lastname@example.org.
To contact the editor responsible for this story: Anthony Aarons at email@example.com.