State aid: EC approves Dexia restructuring plan
01 March 2010
Dexia will focus on its core banking activities and traditional markets - Belgium, France and Luxembourg. It will reduce its public sector lending activity outside these markets, while its bond portfolio, will be ring fenced within a specific division of the bank.
The European Commission has approved, under EU state aid rules, funding from Belgium, France and Luxembourg to restructure Dexia. The Commission's approval is subject to Dexia meeting a number of conditions, including pre-defined liquidity ratios, and implementing the structural and behavioural measures notified to the Commission.
Commission Vice-President with responsibility for competition Almunia said: "The restructuring plan for Dexia is consistent with Commission guidance and, at the end of the restructuring period, will lead Dexia to refocus on its core activities and restore its long‑term viability, in particular thanks to more stable financial resources."
In response to the acute difficulties threatening the survival of the bank, Belgium, France and Luxembourg granted rescue state aid consisting of:
· a capital injection of €6 billion, €5.2 billion of which is viewed by the EC as state aid;
· a guarantee by the Belgian, French and Luxembourg governments in respect of certain of Dexia's liabilities up to a maximum of €150 billion, reduced to €100 billion since 1 November 2009;
· emergency liquidity support from the Belgian National Bank, guaranteed by Belgian State, and
· a guarantee by the Belgian and French governments in respect of a portfolio of impaired assets held by Financial Security Assurance Asset Management (FSAM) for a nominal amount of $16.6 billion at 30 January 2009.
These aid measures were the subject of an EC decision dated 19 November 2008 which required member states to present a restructuring plan for Dexia. The plan was submitted in February 2009 and the Commission opened an in-depth investigation on 13 March 2009.
Under the restructuring plan, as amended by member states on 9 February 2010, the group will focus on its core banking activities and its traditional markets - Belgium, France and Luxembourg. Dexia will reduce its public-sector lending activity outside these markets and its bond portfolio, which will be ring‑fenced in a specific division in the bank in line with a predefined write-down plan. In addition, Dexia will have to continue to reduce its market activities and will cease proprietary trading.
Dexia will have to improve the stability, quality and maturity of its financing sources by respecting a number of ratios to be monitored by the Commission every six months.
The Commission’s in-depth investigation allayed its fears by allowing it to ensure that the value of the FSAM portfolio was consistent with its communication on impaired assets. Moreover, the remuneration paid by Dexia to the Belgian and French authorities was more than required by the communication.
The Commission is making its approval subject to implementation of the commitments made by the member states with regard to achieving its objectives to reduce the size of the balance sheet, for certain target liquidity ratios, and to implement the notified restructuring measures.
Press release
© European Commission
