Belgium agrees Dexia rescue deal

Bank’s problems stem from exposure to Greek debt.

Belgium is to nationalise part of the troubled Franco-Belgian Dexia bank, which is seen as the first victim of the eurozone’s sovereign-debt crisis. The bank’s problems stem from its €3.4 billion exposure to Greek debt. 

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The deal was announced in the early hours of Monday morning (10 October) after extensive talks between bank officials and the governments of France, Belgium and Luxembourg. Dexia was one of the 90 banks stress-tested earlier this year, and the results of the tests did not give cause for concern at that time.

Yves Leterme, Belgium’s caretaker prime minister, said the Belgian state would buy Dexia’s Belgian operations for €4 billion. He said that the purchase would ensure stability on financial markets and reassure account holders that they would not lose their money.

In addition, talks are to begin on splitting off Dexia’s French municipal loans business and joining it with Banque Postale, France’s post office bank, and the Caisse des Dépôts et Consignations, France’s sovereign-wealth fund.

The three countries said they would also provide €90bn worth of guarantees for the bank over a period of ten years. Belgium will provide 60.5% of this, France 36.5% and Luxembourg 3%. A ‘bad bank’ will be created into which some of its assets will be transferred.