EU approves nationalization of Dexia

The European Commission on Monday gave provisional approval for the nationalization of Dexia Bank Belgium (DBB) by the Belgian State, but insisted at the same time that the plan's legitimacy must be further examined. According to the Commission, in-depth investigation is needed to assess whether the acquisition price contains state aid, and if so, whether the aid complies with EU rules for restructuring aid. France, Belgium and Luxembourg agreed on Oct. 9 to split the troubled Belgian-Franco-Luxembourg bank Dexia. According to the agreement, the Belgian government would pay 4 billion euros to take over Dexia SA's Belgium arm DBB. Dexia SA benefited from significant state support from France, Belgium and Luxembourg in 2008/2009, in the form of recapitalization, guarantees on funding and a guarantee on impaired assets. That support was approved by the Commission in February 2010, in return for a restructuring plan to be concluded by the end of 2014. The implementation of the restructuring plan enabled Dexia SA to enhance the stability of its funding and to reduce its non-strategic assets and leveraging. But it also encountered delays, and the liquidity imbalances of Dexia SA have also grown since last summer.