Bail me out once, shame on you; bail me twice, shame on me; come back for a third (and final, we promise!) bailout, only a Franco-Belgian SNAFU is capable of such Einstein-ian repetition. Dexia, that stress-test-passing bastion of all things entirely wrong with European banking and politics is back at the trough. Reuters [6] is reporting what we have known all along, that without massive additional capital injections the bad-bank, crap-bank model simply cannot work.
To wit: Dexia needs to recap its Luxembourg unit (BIL) before its apparently 'imminent' sale to a Qatari sovereign wealth fund (one more billionaire sucker family born every day it seems). The somewhat comical aspect is that post-October (the second - and final, we promise - bailout), as Tageblatt explains [7], BIL's 'legacy' bond portfolio was 'transferred' to its parent Dexia at December 2011 prices - creating a net loss of EUR1.9bn for the subsidiary. This significantly affected the sub's solvency - making it unlikely to meet its capital requirements (which it was 'sure' would be 9% Tier 1 by now!).
But given Dexia's own extensive losses - EUR11.6bn in 2011 and EUR1.2bn in the first six months of 2012 - a capital increase for Dexia BIL may force Dexia to seek funds itself. That would mean mo' money, mo' bailout from the states currently guaranteeing its borrowings - principally Belgium and France, and to a lesser extent Luxembourg - which now look set to rise to EUR90bn in aggregate!
Via Tageblatt:
As has come to the crash of the equity in the BIL? The reason lies in the structure of the contract. The Qataris were ready to buy Dexia BIL, but wanted to take over a bank that was exempt from all risks. This involves extensive surgery. A letter of intent to sell the bank with Qatar was at 05 Signed in April 2012. However Dexia BIL and Dexia committed to sell certain parts of the bank before. This was around the 51 percent stake in Dexia Asset Management, about the 50 per cent stake in RBC Dexia to Dexia Pfandbriefbank, and a 40% stake in the "Popular Banca Privada" as well as a portfolio of "non-strategic nature" in the amount of 2 billion euros.
The main area but of the Dexia BIL had to separate them before they could be easily re-BIL was a package with "toxic" securities worth 1.9 billion euros, to the inside of the Dexia Group member clearing bank for "scrap value" belonged. The question of where the Dexia group had hidden these papers in their group has been answered in the past never. As the Dexia group but with DenizBank, with Dexia Bil and Dexia Belgium had only three operating units store had these papers in these operating units. The question of how high the stock of these high-risk securities in Luxembourg has been found so far never received a response. Dexia in Brussels now informs that he was to take 1.9 billion euros.