Bloomberg News

EU Discussions on Dexia Aid to Be ‘Complex,’ Almunia Says

February 24, 2012

(Updates with further comments from EU Commission starting in third paragraph.)

Feb. 24 (Bloomberg) -- Joaquin Almunia, the European Union’s competition chief, said negotiations on the restructuring of Dexia SA with the French and Belgian governments will be “complex.”

Almunia said in a speech in Brussels today that he will begin talks on the bank’s fate after he receives proposals from the national authorities by the end of next month.

“We are about to open complex discussions about its restructuring or winding down once we receive the proposals from the French and Belgian authorities before the end of March,” Almunia said.

Dexia, based in Brussels and Paris, is being broken up after losing access to short-term funding. The bank said this week that disposal losses, additional writedowns on Greek bonds and a slide in the value of other government debt depleted shareholders’ equity.

The bank yesterday reported a record loss of 11.6 billion euros ($15.5 billion) for 2011, compared with profit of 723 million euros for the prior year. Dexia’s own funds dropped to a negative 2.02 billion euros from 1.13 billion euros at the end of September.

“For state aid, we depend on the cooperation of authorities,” Almunia told reporters after the meeting. “We cannot invent a restructuring plan, we need to await what they will propose.”

‘Unfinished Business’

On other state-aid cases the commission has “unfinished business” with Bayerische Landesbank, the German state-owned lender “that has still to agree on its restructuring,” Almunia said. “Now maybe we are in a time of more constructive” talks with BayernLB, he said.

Almunia urged regulators to support the European Banking Authority, which he said was “needed” to handle and contain future financial crises.

“I still have this feeling that the national supervisors in many quarters are still trying to keep all the competences and trying to weaken the weak position of the very young European Banking Authority,” Almunia said. Financial supervision needs to be “reinforced” at the EU level, he said.

Almunia said he hoped that proposal from Michel Barnier, the EU’s financial services chief, on handling bank failures, would be published “in a few months.”

--Editors: Jones Hayden, Patrick Henry

To contact the reporter on this story: Jim Brunsden in Brussels at jbrunsden@bloomberg.net

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


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