Belgium’s second largest bank gets 6.4 billion euros of bailout

Dexia became the second Belgian bank this week to get a government and shareholder bailout Tuesday when Belgium, France and Luxembourg said they would inject almost EUR 6.4 billion (US$9.2 billion) to keep it afloat.

	Belgium’s second largest bank gets 6.4 billion euros of bailout
	BREAKING NEWS Vladimir Putin gives lengthy and sincere interview to Time magazine The demise of America USA proudly displays its double standards
	76th annual lighting ceremony takes place in New York More...

Dexia's CEO Axel Miller - who immediately stepped down - said the bank had no real option to asking for state help because "our feeling was clearly that this week is going to be very tense on the market and we might be ... one of the banks that might be put under pressure."

Dexia, a French-Belgian specialist in lending to local governments that ran up huge losses in its U.S. operations, closed nearly 30 percent lower Monday - triggering emergency talks with government officials.

This came barely two days after Belgium, the Netherlands and Luxembourg moved to save Belgian-Dutch bank Fortis on Sunday, pumping EUR 11.2 billion (US$16.4 billion) after its shares shrank by a fifth Friday. Traders saw the bank as overleveraged and lost confidence in its ability to pay for its expensive purchase of Dutch bank ABN Amro.

Markets clearly welcomed the bailout with Dexia's share price climbing 11 percent to EUR 8.03 in Paris trading and Fortis rising 10 percent in Amsterdam by noon local time on Tuesday.

Dexia said the extra money would allow it remain "one of the better capitalized banks in Europe" even if market volatility further devalues securities and other products it holds. It said it expects its equities portfolio to lose more value.

Belgian authorities and Belgian shareholders said in a statement that they would invest EUR 3 billion in the bank, while the French government - via its investment arm CDC which holds just over 10 percent in Dexia - will invest another EUR 3 billion. Luxembourg will add EUR 376 million.

For Dexia, the Belgian and French investments come in the form of a capital increase that will issue new shares at US$9.90 per share, while the Luxembourg government will get newly issued convertible bonds.

In return the bank promised to improve the way it is run - with Miller and chairman Pierre Richard saying they would resign and governments demanding "significantly" better corporate governance.

Miller said the company had been hit by "very nervous markets" and was partly a victim of Fortis' troubles that "drew attention to this corner of Europe."

"I don't know of many instances recently where investors have been found willing to put additional equity in banks," he told reporters on a conference call.

Read more news