Dexia to receive additional $12.56 bn in state guarantees from owners

Belgian-French bank Dexia will receive an additional €10 billion ($12.56 billion) in state guarantees from its owners Belgium, France and Luxembourg after the European Commission (EC) temporarily approved the increase in order to preserve financial stability of the ailing European financial institution.

The Brussels-based regulator said that it has ''temporarily approved'' the €10-billion increase in guarantees ''in order to preserve financial stability'' and added that it would take a final call on whether the capital injection was compatible with EU state aid rules when it had earlier proposed  to break up the bank.

Brussels-based Dexiais engaged in public sector finance, retail and commercial banking services, asset management, financial markets and insurance and operates primarily in Belgium, France, Italy, Spain, and Portugal.

Following the global credit crisis, Dexia was bailed out by the governments of Belgium, France and Luxembourg through a capital injection of €6.4 billion ($8.7 billion) and a state guarantee for its liabilities for a total amount of €150 billion, effective 31 October 2008.

Belgium provided 60.5 per cent of the guarantee while France contributed 36.5 per cent and Luxembourg 3 per cent.

In September 2009, the three states agreed to renew the guarantee to Dexia's funding for another year, until 31 October 2010. However, considering the improved liquidity situation of the lender, the states lowered the cap on the guarantee to €100 billion.