Dexia SA centre stage for next European bank rescue

by Gill Montia

Story link: Dexia SA centre stage for next European bank rescue

Following the rescue of European banking and insurance giant, Fortis, over the weekend, Dexia SA, the Belgium-based bank that lends to local governments, is the next European financial institution on the verge of collapse.

The Belgium government and Dexia’s shareholders have come together to discuss a way of shoring up the bank, which is apparently in need of a cash injection of around €7 billion.

The group has had to bail-out its US bond insurance business, Financial Security Assurance Inc., and its share price has fallen by around 59% this year.

Dexia is a leading lender to French local councils and the Government of France had indicated that it is prepared to assist in a rescue.

Meanwhile, Fortis, which has received an €11.2 billion injection of cash from the governments of the Netherlands, Belgium, and Luxembourg, is expected to sell its stake in ABN Amro, the Dutch bank, which it acquired last year.

According to a report in The Times, analysts estimate that the business, which cost Fortis €24 billion, is now worth around €8 billion.