Dexia commits to clean-up, France, Belgium ready to act

Mon Oct 3, 2011 7:58pm EDT
 
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By Philip Blenkinsop

LUXEMBOURG (Reuters) - Franco-Belgian financial group Dexia vowed on Tuesday to clean up its balance sheet, with France and Belgium poised to act, after concerns about its exposure to Greece and a Moody's warning about its liquidity pummelled its shares.pummeled

The bank summoned board members for a emergency meeting from Monday evening into the early hours of Tuesday.

Dexia said afterwards that it was weighed down in the current environment by the size of its assets for sale, including 95 billion euros ($126 billion) of bonds.

It added that chief executive Pierre Mariani had been charged with preparing measures to resolve such structural problems that were harming its operations.

Dexia's statement came shortly after the conclusion of a meeting of euro zone finance ministers in Luxembourg, including those of Belgium and France, both shareholders in the group.

"The two governments are following the situation and will intervene if necessary," Belgian finance minister Didier Reynders told reporters as he departed the meeting.

The mid-tier bank has one of the largest exposures to Greece among overseas lenders and has been at the center of media speculation in recent weeks that it will split or will need another bailout, potentially from taxpayers.

According to a source familiar with the situation, Dexia's shareholders were keen to avoid a capital increase, but the group was likely to put a part of its French municipal lending unit Credit Local for sale.   Continued...