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Dexia shares in new slump as Greece worries continues

Dexia SA

Shares in the Franco-Belgian bank Dexia have fallen for the second day running as fears over its exposure to Greece debt continue.

They fell 37% at the open of Tuesday trading after losing 10% on Monday following an alert from the Moody's ratings agency.

Dexia is holding an emergency board meeting amid serious concerns.

The governments of France and Belgium, which are joint shareholders in Dexia, moved to guarantee its debts.

Trashed

I'm starting to think that this recovery might not be locked in after all !

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Dexia shares in new slump as Greece worries continues

Dexia SA

Shares in the Franco-Belgian bank Dexia have fallen for the second day running as fears over its exposure to Greece debt continue.

They fell 37% at the open of Tuesday trading after losing 10% on Monday following an alert from the Moody's ratings agency.

Dexia is holding an emergency board meeting amid serious concerns.

The governments of France and Belgium, which are joint shareholders in Dexia, moved to guarantee its debts.

Trashed

I'm starting to think that this recovery might not be locked in after all !

Any news on how much debt Belgium is guaranteeing and how much France is guaranteeing?

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Any news on how much debt Belgium is guaranteeing and how much France is guaranteeing?

I'd be surprised if Belgium was in a position to guarantee anything right now.

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Could be a good place to keep Euros if they put government guarantees in place, just like Northern Rock was here.

I transferred most of my GBP into NR at 6.9% fixed for one year, all of it guaranteed by HMG.

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What they need to do is issue another denial, that always reassures the market. Still if they'd been bailed out properly a few years ago all of this could have been avoided.

Another zombie to add to the list.

Good to see the taxpayers picking up the tab.

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From Peston:

. . . it was only on July 15 that the European Banking Authority . . . . portrayed Dexia as one of the strongest banks in Europe, because it meant Dexia was deemed by regulators to have more than twice the amount of capital it needs to absorb losses.

Which is perceived today by investors as something of a joke, in that the cost of insuring Dexia's subordinate debt implies that providers of this subordinated debt are facing losses of 35%.

The important point about Dexia is that its current difficulties tend to undermine confidence in the famous European stress tests.

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Dexia shares in new slump as Greece worries continues

Dexia SA

Shares in the Franco-Belgian bank Dexia have fallen for the second day running as fears over its exposure to Greece debt continue.

They fell 37% at the open of Tuesday trading after losing 10% on Monday following an alert from the Moody's ratings agency.

Dexia is holding an emergency board meeting amid serious concerns.

The governments of France and Belgium, which are joint shareholders in Dexia, moved to guarantee its debts.

Trashed

I'm starting to think that this recovery might not be locked in after all !

Belgium still doesn't have a Government.

So who makes the decisions re Dexia ?

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http://www.telegraph.co.uk/finance/financialcrisis/8805895/Whos-next-as-Dexia-takes-first-step-towards-rescue.html

With bond markets shut since May, interbank funding in seizure, and money market investors withdrawing all but the most short-term financing it has been only a matter of time before a major bank would hit the wall.

Like 2008 and the inexorable fall of banking dominoes, the question now is who is next?

Societe Generale’s deputy chief executive and chief financial officer speaking at a banking conference this morning have repeated their insistence the French lender remains “fundamentally robust”.

Maybe it is, but in these markets few investors are prepared to give management teams the benefit of the doubt. Lehman Brothers, Royal Bank of Scotland, Landsbanki – all gave impassioned protestations they were fine, until they were not.

More than a few analysts are reaching the conclusion that a new round of government rescues and restructurings are on the cards. SocGen’s own analysts yesterday recommended that clients buy protection against the debt of Barclays, warning the bank may not be able to generate sufficient internal capital to meet the incoming Basel III capital requirements.

It seems likely that RBS and Lloyds Banking Group could require some additional form of state support within the next six months.

This will most likely lead to a new round of so-called “bank bashing” – this will be unfair. RBS and Lloyds have been doing all the right things to reduce risk, there problem is this latest leg of the crisis has come upon them too quickly.

Another year or two of asset reductions and they could probably have weathered the storm alone, as it is RBS could well face full nationalisation within the next six to 12 months and Lloyds some new form of liquidity support.

However, compared to what faces their Continental peers this will seem mild. Since 2008 many of Europe’s major banks have chosen to ignore the warning signals from the markets and have continued with business as normal, pretending the crisis was an “Anglo-Saxon” phenomenon and nothing to do with them.

Big mistake. An orderly shrinking of their balance sheets over the last three years, as undertaken by British and US banks, would have seen them take losses and probably raise significant amounts of new capital, but it would have taken place in relatively favourable markets.

The awful challenge they now face will be doing the right things at completely the wrong time. A paradox of deleveraging will soon be upon them – what is good for one bank, is catastrophic when all are trying to do it at the same time.

Quite how bad things could get is hard to say. With so many crises now converging – sovereign debt, rapidly slowing growth, new banking losses – the banking problems will be just one of many and will not dominate the headlines in the way they did between 2007 and 2009, this should not hide the fact they are just as severe.

Welcome to the banking crisis of 2011.

so SocGen saying they are fine its everyone else.

Viva La france

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The French just don't want / can't bailout their banks. This is not good.

http://www.telegraph.co.uk/finance/financialcrisis/8782663/Debt-crisis-live.html

10.30 From Bruno Waterfield in Brussels: the Chancellor has been pressing EU finance minsters to look at their banks as the debt crisis escalates. Dexia (see 9.30 and 10.00 posts) could be "the canary in the coalmine", one diplomat said.

Bruno reports that the French holdings in Dexia are said to be the stressed part, and Paris is reluctant to be left holding the bad debt in order to protect its AAA rating, amid its much wider banking exposure to Greek debt.

The Belgians, he says, are more happy to break Dexia up and create a bad bank (with a greater cost to France) with the viable Brussels end of the business available for a sell off.

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The important point about Dexia is that its current difficulties tend to undermine confidence in the famous European stress tests.

No sh1t. I don't know how anyone could ever take these stress tests seriously :rolleyes:

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No sh1t. I don't know how anyone could ever take these stress tests seriously

I don't think anyone did. Our whole world now runs on a version of the Emperor's new clothes- so long as nobody admits the banks are denuded of capital the game goes on.

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No sh1t. I don't know how anyone could ever take these stress tests seriously :rolleyes:

http://www.bnb.be/pub/01_00_00_00_00/01_06_00_00_00/01_06_01_00_00/20110715_stresstest.htm?l=de

The EU-wide stress test requires that the results and weaknesses identified, which will be disclosed to the market, are acted on to improve the resilience of the financial system. Following completion of the EU-wide stress test, the results determine that KBC Bank and Dexia meet the capital benchmark set out for the purpose of the stress test. Both banks will continue to ensure that appropriate capital levels are maintained.

How could you not believe this???

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Dexia passed the EU bank stress tests in July of this year with flying colours. So much for the stress tests. The results for Dexia can be found here...

www.nbb.be/doc/cp/eng/eu_framework/2011_stresstest_dexia.xls

Amongst other things this spreadsheet has the sovereign debt exposures for Dexia - if contagion sets in for the PIIGS, Dexia is toast...

Dexia actually had Tier 1 capital (via the test methodology) of 10.4% - one of the better results from the stress tests. Which makes you wonder what will happen to the banks with lower tier 1 ratios in the event of a Greek default.

The fact Dexia has gone under on the same day Italy has been downgraded (again) is no coincidence......

Edit fix url

Edited by geezer466

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I don't think anyone did. Our whole world now runs on a version of the Emperor's new clothes- so long as nobody admits the banks are denuded of capital the game goes on.

And who emptied the banks?

Politicians

And politicians are now desperate to save the banks, because if the banks fail then the European political project fails

And a generation of politicians are going to be exposed as liars and thieves.

:blink:

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http://www.zerohedge.com/news/dexia-bailout-verge-collapse-threatens-take-france-aaa-rating-down-it

Having followed the fortunes of the beleaguered Belgian bank from before it appeared on anyone's worksheets, we are hardly surprised that the EU Commission charged with confirming the good-bank / bad-bank restructuring is concerned at the deal that Belgium has with the French (and Luxembourg) government to backstop/finance Dexia's debt. Belgium's De Standaard (and two other European newspapers) today suggests the Belgians fear the EUR90bn deal is 'not feasible' as it stands (with a Belgium 60.5%, France 36.5%, and Luxembourg 3% weighting). Given the change in market conditions the commission, according to the article, is concerned at the ability of each country to finance its respective guarantee (most obviously Belgium) and therefore can renegotiate the October bailout deal. Belgian FinMin Reynders would not confirm the renegotiations but was evidently waiting on the commission's 'comments or additions'. The French are obviously not-amused and of course, any increase in the size of France's guarantee will further impact its ability to maintain the much-vaunted AAA rating.

Bailout may be illegal

And it just keeps on getting more and more surreal.

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