Dexia's Belgian Bank To Be 100% Nationalized

Tyler Durden's picture

Earlier today, Reuters reported that the final solution for Dexia is imminent. "The governments of France, Belgium and Luxembourg reached agreement on Sunday on a rescue package for Dexia , which will be put to the stricken Franco-Belgian bank's board later in the day for approval. "The governments... have reaffirmed their solidarity in finding a solution to secure the future of Dexia," said a statement from the office of Belgium's caretaker Prime Minister Yves Leterme. "The suggested solution, which is also the result of intense consultations with all partners involved, will be submitted to Dexia's Board of Directors for approval." Sure enough, from Dow Jones:

  • GOVERNMENTS AGREE TO NATIONALIZE 100% OF DEXIA'S BELGIAN BANK

We are waiting for more details but with that we have Belgium-Dexia CDS compression, an imminent Belgian rating downgrade, and the unleashing of the completely unpredictable domino effect.

Oddly enough, it is none other than Qataer, which last weekend made news with a full out grab for Greek gold, that is now picking off the Dexian carcass:

Qatari Sovereign Fund Seen As Buyer Of Dexia Luxembourg Bank

 

The Qatar Investment Authority, the nation’s sovereign wealth fund, is the leader of a consortium of investors that is set to buy Dexia SA’s Luxembourg retail banking subsidiary, a person familiar with the discussions said Thursday.

 

The sale is part of a plan to break up Dexia set in motion after Moody’s Investors Service this week warned that the bank’s heavy dependence on wholesale funding threatened its stability.

 

The Luxembourg government would have a blocking minority stake in the business, Dexia Banque Internationale a Luxembourg, if the deal is finalized, which could happen over the weekend, the person said.

Some more on what the full "package" will look like again from Reuters:

French President Nicolas Sarkozy was due to meet German Chancellor Angela Merkel on Sunday in Berlin to thrash out differences on how to use the euro zone's financial firepower to salve a sovereign debt crisis that threatens the global economy.

 

Germany and France have so far been split over how to recapitalise shaky European banks. Paris wants to tap the euro zone's 440 billion euro ($594 billion) European Financial Stability Facility (EFSF) to recapitalise French banks, while Berlin is insisting the fund should be used as a last resort.

 

Dexia's overhaul will likely see its French municipal financing arm split from the group and merged with French state bank Caisse des Depots and Banque Postale, the French post office's banking arm.

 

The Belgian government wants to nationalise Dexia's largely retail banking business in Belgium.

Healthy units, such as Denizbank in Turkey, will be sold.

 

A 'bad bank' supported by state guarantees will hold 95 billion euros in bonds, including 12 billion euros of sovereign debt of weaker euro zone periphery nations.

 

Including 7 billion euros of securities linked to U.S. mortgages, France and Belgium may need to provide guarantees to cover up to 200 billion euros of assets, which would be more than 55 percent of Belgian GDP.

 

The key issues for Sunday's talks will be how to divide up the 'bad bank' assets, how much Belgium should pay to nationalise Dexia's Belgian banking business and whether others, such as Belgium's regions, would be involved in its purchase.