BANK RESCUE:FRANCE AND BELGIUM are expected to announce a rescue plan today for the struggling Dexia bank, hoping a break-up of the lender will prevent wider contamination of the banking industry.
The plan is expected to involve the bank’s French municipal funding arm being broken off and merged with French state bank Caisse des Dépôts and Banque Postale, the banking arm of France’s post office, after finance minister François Baroin said this was the most “solid” option.
Belgium’s caretaker prime minister, Yves Leterme, said nationalisation of the banking activities, including a large retail operation, was also being considered. Dexia’s shares hit an all-time low on Tuesday but recovered some ground yesterday as the Franco-Belgian rescue appeared to take shape and as signs that euro zone finance ministers were exploring ways to recapitalise banks boosted markets.
“I think that [today] a solution should be found,” Mr Baroin told French radio.
Dexia, which received a bailout in 2008, is being rescued again after its short-term funding evaporated as Europe’s sovereign debt crisis worsened.
France and Belgium, which have stakes in the bank since the 2008 bailout, have said they will take “all necessary measures” to save what is the leading provider of local government financing in France. But neither is enthusiastic about injecting capital into the group given budgetary constraints. Amid concern in France that Dexia’s problems could threaten the country’s triple-A credit rating, Bank of France governor Christian Noyer said such speculation was “exaggerated and inaccurate”.
French banks, he said, were generally in good health and the central banks of Belgium and France would ensure Dexia had enough liquidity.
“We will loan Dexia as much as it needs,” Mr Noyer said.
His intervention followed claims by an opposition deputy, Claude Bartolone, that Dexia could contaminate other banks and hit already tight financing for local authorities.
The continuing uncertainty over Dexia’s fate led some customers to withdraw funds and overload a telephone helpline yesterday, according to reports.
