Bloomberg News

Dexia Belgian, French Guarantees May Get EU Approval Tomorrow

December 20, 2011

Dec. 20 (Bloomberg) -- Dexia SA, the French-Belgian lender that’s being broken up, may get temporary European Union approval for as much as 45 billion euros (58.9 billion) in guarantees from Belgium, France and Luxembourg tomorrow.

The EU’s decision could come as soon as tomorrow and should be “positive,” EU Competition Commissioner Joaquin Almunia told reporters in Brussels today. “Hopefully, I will be able to announce the decision” tomorrow.

Dexia, rescued by the Belgian, French and Luxembourg governments in October for the second time in three years, obtained as much as 45 billion euros in guarantees from the countries to cover its financing needs until the end of May, the Paris- and Brussels-based bank said in a statement on Dec. 5. The bank today sealed a deal to sell its Luxembourg unit, Dexia Banque Internationale à Luxembourg SA, for a total of 730 million euros to Precision Capital of Qatar.

The temporary guarantee is “the first step” for the three governments to provide as much as 90 billion euros, Dexia said earlier this month. Belgium is taking on 60.5 percent of the amount, France 36.5 percent and Luxembourg 3 percent.

The bank will likely have to submit extra restructuring measures to show how it plans to compensate for harm to competition caused by the state aid before it can win final EU approval for the rescue. Dexia is planning to “radically shrink in size” and won’t have to comply with capital rules set by the European Banking Authority, it said in a Dec. 8 statement.

Dexia, once the world’s largest municipal lender, said Nov. 9 its shareholder equity shrank 84 percent after the nationalization of its Belgian bank unit and declines in the value of government-bond holdings.

Belgian borrowing costs started surging after a caretaker government bought Dexia’s Belgian banking unit for 4 billion euros and agreed to guarantee as much as 54.5 billion euros of the crisis-hit lender’s liabilities for as long as 10 years.

--Editor: Anthony Aarons

To contact the reporters on this story: Aoife White in Brussels at awhite62@bloomberg.net, Stephanie Bodoni in Brussels via sbodoni@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net.


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