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IP/09/399
Brussels, 13 March 2009
State aid: Commission opens in-depth investigation
into restructuring of Dexia; authorises certain urgent
measures
The European Commission has started an in-depth investigation under EC
Treaty state aid rules to establish whether the restructuring plan for the
Dexia group will restore the group's long-term viability. The plan is
accompanied by a capital injection of €6.4 billion, announced in September
2008, and maintenance of a guarantee of up to €150 billion granted jointly by
Belgium, France and Luxembourg, which was earlier approved as rescue aid
by a decision of 19 November 2008 (see IP/08/1745). The Commission also
authorised a guarantee for a portfolio of assets for a total value of
$16.9 billion extended by the Belgian and French governments, a measure
deemed indispensable for the sale of FSA, Dexia's US subsidiary, which is a
prerequisite for the bank's return to viability. In accordance with the decision
of 19 November 2008, the Member States have notified the Commission of a
restructuring plan for the bank. The opening of an in-depth investigation
gives interested parties an opportunity to comment on the proposed
measure. It does not prejudge the outcome of the procedure and the
measures approved as rescue aid remain valid while the plan is being
studied.
EU Competition Commissioner Neelie Kroes said: "The Commission is required to
check that the large amount of aid provided to Dexia is accompanied by realistic
projects to address the problems that led to the current situation. We cannot reach a
favourable conclusion at this stage on the plans submitted to us. We therefore have
to study them in depth. However, the Commission considers that the guarantee
needed for the sale of FSA may be authorised immediately."
Dexia is a financial group operating in the banking and insurance sectors. The parent
company, Dexia SA, is a limited company incorporated in Belgium and listed on the
Euronext Paris and Euronext Brussels stock exchanges. Dexia specialises in loans
to local authorities but also has many private customers.
In response to the acute difficulties threatening its survival, Belgium, France and
Luxembourg granted state aid to rescue the bank that was the subject of a
Commission decision of 19 November 2008. This decision, which covered only part
of the aid, required these Member States to submit a restructuring plan for Dexia.
To limit the anti-competitive effects of aid, European state aid rules lay down that a
restructuring plan must restore the enterprise's long-term viability within a reasonable
timescale on the basis of realistic assumptions. After reviewing the plan notified by
the Member States, the Commission must check that these criteria are met. In
particular, the Commission has doubts about the viability of the proposed business
model, whether Dexia's own contribution to its restructuring costs is sufficient and
about the compensatory measures to eliminate the distortions of competition that
may be caused by state aid.
By the same decision the Commission approved a guarantee granted by Belgium
and France to cover Dexia's potential losses from the assets of its US subsidiary
FSA. The sale of the loss-making subsidiary is essential for Dexia's recovery. The
sale of FSA, however, may not be achieved unless FSA is relieved of some "toxic"
assets whose market value is currently extremely low. As Dexia is not able to
shoulder this risk alone, the guarantee provided by the Member States is necessary
for the sale of FSA, itself a prerequisite for any restructuring. The Commission has
therefore approved the guarantee in principle. Nevertheless, as part of its in-depth
investigation, the Commission reserves the right to analyse in greater detail certain
aspects of the contractual relations between Dexia and the Member States in
respect of this guarantee. This analysis will be carried out taking into account the
new Commission communication on the treatment of impaired assets that was
adopted on 25 February 2009 (see IP/09/322). This case is the first application of the
new communication.
Other aid measures approved by the decision of 19 November 2008 (the guarantee
for bonds issued by Dexia and the liquidity support provided by the Member States)
may stand until the Commission has completed its investigation into the restructuring
plan.
The non-confidential version of this decision will be made available under the case
number C 9/2009 in the state aid register) on the DG Competition website once all
the confidentiality problems have been resolved. New publications of state aid
decisions on the internet and in the Official Journal are listed in the online newsletter
State aid Weekly e-News).
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