Eurozone prepares Dexia breakup plan

Dexia, the European lender also active in Turkey, will probably be broken up, with its French lending business separated and the Belgian arm nationalized. Dexia customers have withdrawn 300 million euros from their accounts, a paper says
Dexia, headquartered in Brussels, holds some 80 billion euros of deposits in Beligum. AFP Photo / BELGA / VIRGINIE LEFOUR.

Dexia, headquartered in Brussels, holds some 80 billion euros of deposits in Beligum. AFP Photo / BELGA / VIRGINIE LEFOUR.

Belgium and France expect to finalize by Thursday a rescue plan for Dexia that would sever the bank’s French lending business and may nationalize its Belgian arm.

Battered in recent weeks by heavy exposure to Greece and problems accessing wholesale funds, Dexia’s shares hit an all-time low on Tuesday, prompting shareholders Belgium and France to come to its rescue.

“I think that tomorrow a solution should be found,” France’s finance minister, Francois Baroin, told RTL radio on Wednesday. He repeated that Dexia could not keep its current shape. “It is indisputable.”

Baroin also said a solution involving its absorption by French state bank Caisse des Depots and Banque Postale, the banking arm of the postal service, would be the most “solid.”

The lender to thousands of French and Belgian towns, which also needed propping up after the 2008 crisis, will see its French municipal financing arm broken off and combined with French state bank Caisse des Depots and Banque Postale, the banking arm of the French post office.

‘Nationalization considered’

Belgium’s caretaker prime minister, Yves Leterme, said nationalization of the banking activities, including a large retail operation, was being considered.

“One of the possibilities to consolidate Dexia Bank Belgium is, at a certain point, to ensure that it is taken up by the government,” Leterme told Belgian station Radio 1.

Leterme also said guarantees Belgium planned to provide Dexia did not represent a risk for the country and, while nationalization would hit public sector debt, the increase would be “quite limited”.

Bank of France Governor Christian Noyer said speculation that support of Dexia would threaten France’s AAA credit rating were “exaggerated and inexact.”

French banks, he said were generally in good health and central banks of Belgium and France would ensure Dexia had enough liquidity. “We will loan Dexia as much as it needs,” Noyers told Europe 1 radio.

Dexia shares were 4.1 percent higher in early trading Wednesday. However, they are 28 percent down this week and 57 percent lower since the start of the year.

Belgian newspaper De Tijd reported customers had gone into branches to withdraw 300 million euros ($398 million) from Dexia accounts. This excluded online transactions. Dexia in Belgium holds some 80 billion euros of deposits.

“We have had some customers taking money out, but it has been limited,” a Dexia spokeswoman said. “We have faced many questions and we have been explaining the situation a lot.”

There was no sign of any panic, or any queues, at Dexia’s branches in Brussels on Wednesday morning.

“I am not withdrawing any money, as a matter of fact, I just deposited some,” one customer said.

Wednesday, October 5, 2011
LONDON / MADRID- Agence France-Presse