Bloomberg News

Dexia BIL Sale Terms, Belgian Arco Guarantee Probed by EU

April 03, 2012

European Union regulators will probe Luxembourg’s purchase of a 10 percent stake in Dexia Banque Internationale a Luxembourg SA and will investigate a Belgian state guarantee for the cooperatives of Dexia SA (DEXB) shareholder Groep Arco.

The European Commission opened in-depth investigations to check that the Luxembourg government’s stake in Dexia BIL was bought on market terms and that a Belgian deposit guarantee program for financial cooperatives such as Arco didn’t give those organizations an unfair advantage over other investors, according to an e-mailed statement today.

Following the collapse of French-Belgian lender Dexia SA in 2011, the bank agreed to sell its retail and private-banking businesses in Luxembourg to Precision Capital of Qatar and the Luxembourg government. Regulators said they did not have enough information to assess the value of the unit “given that the proposed sale is the result of exclusive negotiations with one private investor.”

Dexia, once the world’s largest municipal lender, was broken up after losing access to short-term funding. The probes add to another EU investigation into state guarantees for Dexia SA from Belgium, France and Luxembourg. EU negotiations on its restructuring with France and Belgium will be “complex,” the EU’s antitrust chief, Joaquin Almunia has said.

Dexia Bank Belgium said in an e-mail that the EU announcements were “normal procedure” and declined to comment further.

Dexia BIL, Groep Arco and the Luxembourg and Belgian finance ministries didn’t immediately respond to e-mails seeking comment.

Regulators must approve large government rescues for banks and have required lenders to sell off assets to compensate for harm to competition. Guarantees or government shareholdings that aren’t made on market terms may involve a state subsidy. The EU can order companies to repay illegal state aid.

To contact the reporter on this story: Aoife White in Brussels at awhite62@bloomberg.net.

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


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