BRUSSELS — European Union regulators on Friday approved a bailout for the bank Dexia that includes a €5.5 billion capital injection by Belgium and France.
The European Commission, the Union’s executive arm, waved through the restructuring and the $7.3 billion capital increase of Dexia, allowing the bank to be almost totally nationalized and its borrowing supported by guarantees from Belgium, France and Luxembourg.
Dexia’s shareholders in the past week accepted that France and Belgium would own almost 96 percent of the group after the restructuring, which was done to avoid the group’s immediate liquidation. Dexia’s unraveling would have likely unsettled financial markets.
“As foreseen by our rules, the approved plan ensures that the continued market presence of some parts of the Dexia group is truly justified, without artificially keeping alive a failed business model, and that competition distortions resulting from the aid received are minimized,” Joaquín Almunia, the E.U. competition commissioner, said in a statement.
He added that the approved plan “brings the cost for the taxpayer down to the level strictly necessary to carry out the orderly resolution process.”
France, Belgium and Luxembourg, where Dexia had operations, are winding down the bank after it almost collapsed in September 2008.
The deflating credit bubble exposed Dexia’s reliance on short-term financing; its balance sheet was also scorched by failed investments that included hundreds of millions of dollars in unsecured Lehman Brothers bonds.
Belgium bought the group’s retail operations in the country for €4 billion in October 2011, when Dexia was bailed out for a second time.
Those operations were renamed Belfius. The commission said Belgium had made adequate commitments to not distort competition in the banking and insurance markets where Belfius was active.
Belfius would also adequately contribute to its own restructuring costs, the commission statement added.
The commission also approved plans for Dexia’s lending operations in France, which will be merged into a new entity with participation from the French government and the postal bank.
nytimes.com
The European Commission, the Union’s executive arm, waved through the restructuring and the $7.3 billion capital increase of Dexia, allowing the bank to be almost totally nationalized and its borrowing supported by guarantees from Belgium, France and Luxembourg.
Dexia’s shareholders in the past week accepted that France and Belgium would own almost 96 percent of the group after the restructuring, which was done to avoid the group’s immediate liquidation. Dexia’s unraveling would have likely unsettled financial markets.
“As foreseen by our rules, the approved plan ensures that the continued market presence of some parts of the Dexia group is truly justified, without artificially keeping alive a failed business model, and that competition distortions resulting from the aid received are minimized,” Joaquín Almunia, the E.U. competition commissioner, said in a statement.
He added that the approved plan “brings the cost for the taxpayer down to the level strictly necessary to carry out the orderly resolution process.”
France, Belgium and Luxembourg, where Dexia had operations, are winding down the bank after it almost collapsed in September 2008.
The deflating credit bubble exposed Dexia’s reliance on short-term financing; its balance sheet was also scorched by failed investments that included hundreds of millions of dollars in unsecured Lehman Brothers bonds.
Belgium bought the group’s retail operations in the country for €4 billion in October 2011, when Dexia was bailed out for a second time.
Those operations were renamed Belfius. The commission said Belgium had made adequate commitments to not distort competition in the banking and insurance markets where Belfius was active.
Belfius would also adequately contribute to its own restructuring costs, the commission statement added.
The commission also approved plans for Dexia’s lending operations in France, which will be merged into a new entity with participation from the French government and the postal bank.
nytimes.com
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