[QODLink]
Business
European leaders agree on Dexia 'break up'
Rescue plan approved by France, Belgium and Luxembourg likely to pave way for dismantling the troubled bank.
Last Modified: 09 Oct 2011 13:34
The French and Belgian prime ministers finalised the plan for Dexia at a meeting in Brussels [Reuters]

France, Belgium and Luxembourg have agreed to a rescue plan for Dexia ahead of a planned board meeting expected to decide on a break-up of the first lender to fall victim to the euro zone crisis.

"The governments... have reaffirmed their solidarity in finding a solution to secure the future of Dexia," said a statement on Sunday from the office of Yves Leterme, Belgium's caretaker prime minister.

The stricken Franco-Belgian bank's board will review the deal later in the day.

Al Jazeera's Nick Spicer, reporting from Berlin, said the plan is likely to be accepted by the bank's board. 

"It is pretty much a done deal," he said.

France and Belgium became part owners of the bank during a 6bn euro ($7.8bn) bailout in 2008. Luxembourg holds a smaller stake. They have promised to ensure that no Dexia depositors lose money.

After Dexia's shares plunged last week due to fears it could go bankrupt, the French and Belgian governments stepped in and guaranteed its financing and deposits.

Debt exposure

The bank said in a statement on Friday that trading in its shares would remain frozen until it could "communicate more precisely on the various choices and options concerning the future of the group".

The bank has significant exposure to Greek debt, and there are fears Greece may default in some fashion.

Finding a solution is particularly urgent for Belgium because Moody's Investors Service on Friday placed the country's Aa1 rating on review for possible downgrade, due in part to the expected expense of guaranteeing that Dexia's depositors will lose no money.

The bank's near collapse has added to investors' worries about the solidity of European banks and has coincided with increased European Union talk about co-ordinated action to recapitalise banks across the continent.

Banks face a $198bn capital shortfall under a base case and a $303bn shortfall under a stressed scenario, according to analysts at JPMorgan.

Source:
Agencies
Topics in this article
People
Country
City
Featured on Al Jazeera
Italy struggles to deal with growing flood of migrants willing to risk their lives to reach the nearest European shores.
Israel's Operation Protective Edge is the third major offensive on the Gaza Strip in six years.
Muslims and Arabs in the US say they face discrimination in many areas of life, 13 years after the 9/11 attacks.
At one UN site alone, approximately four children below the age of five are dying each day.
Featured
The new military government has issued warnings that it will soon start to clampdown on immigration offenders.
As Snowden awaits Russian visa renewal, the world mulls role of NSA and expects more revelations from document trove.
A handful of agencies that provide tours to the Democratic People's Republic of Korea say business is growing.
A political power struggle masquerading as religious strife grips Nigeria - with mixed-faith couples paying the price.
The current surge in undocumented child migrants from Central America has galvanized US anti-immigration groups.
join our mailing list