The plan by France and Belgium to wind down most of Dexia SA (DEXB), which has received two government rescues, will be approved by European Union regulators on Dec. 28, the EU’s antitrust chief said.
EU Competition Commissioner Joaquin Almunia said Belfius Bank NV, the nationalized Belgian retail bank, will cut all ties with the Dexia group as part of the restructuring plan to be approved next week. Dexia Municipal Agency will be sold to a consortium and become a lender to French local governments, he said.
“The orderly resolution plan avoids disorderly liquidation which would have had substantial effects (DEXBBB:US) on financial stability,” Almunia said at a press conference in Brussels today. “It allows for the controlled winding-down of the largest bad bank in the EU with assets of over 300 billion euros ($399 billion.)”
Belgium and France agreed on Nov. 8 on an additional 5.5 billion-euro recapitalization of the bank and will charge the bank less for its government funding backstops. The bank, whose shares have lost almost all their value, reported a loss for the third quarter of 1.23 billion euros. Dexia shareholders meet tomorrow in Brussels to approve the government transaction.
Moniek Delvou, a spokeswoman for Belfius in Brussels, declined to comment, saying the bank would wait for the EU’s decision next week. Representatives of Dexia didn’t immediately respond to e-mails seeking comment.
Almunia said he would approve a state guarantee of 85 billion euros as part of his decision next week. The most difficult issue was negotiating with the governments and the management on how Dexia would be split and which parts would be wound down, he told reporters.
“We could not authorize the granting of 85 billion euros of state guarantee remunerated at a very low rate for an entity which would remain on the market,” he said. “This whole question of the separation between the bad bank and the good bank gave rise to all sorts of meetings, exchanges of views, arguments” among regulators, the governments and the group’s management, he said.
Dexia, which was rescued with taxpayer funds a first time in 2008, said on Dec. 4 that it was in talks to sell its asset- management business to GCS Capital for an undisclosed sum. The transaction is one of the last disposals as part of the planned breakup announced in October 2011 after the lender lost access to short-term funding. Dexia sold banking units in Turkey and Luxembourg earlier this year.
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