Dexia fails to calm investors, board to convene

BRUSSELS (Reuters) - Belgo-French financial services group Dexia failed to calm investors on Monday after seeking to dispel concerns related to Hypo Real Estate, a German lender that was rescued in a deal struck late on Sunday.

Dexia shares slid as much as 22 percent to an all-time low of 6.673 euros. The DJ Stoxx European banking index was 6.9 percent lower.

"You have to put it into context. All the banks are down," a Brussels-based trader said.

"However, there was a clear message from the (Belgian) government that they will be guarantors for everything on an account, but they don't want to bail out shareholders."

BNP Paribas and the Belgian and Luxembourg states carved up financial group Fortis in a deal announced late on Sunday.

Fortis Group has been left with a 66 percent share of a portfolio of structured credit products and the international insurance business. Analysts believe the shares are now worth 3.5 to 4.0 euros, having closed at 5.422 euros on Friday.

Dexia received a 6.4 billion euro ($8.70 billion) bailout from the Belgian, French and Luxembourg governments and key shareholders on Tuesday.

Dexia's board conferred on Sunday evening, as they had done twice a week, and announced the group was able to deal with deteriorating markets.

It said previously that credit risks related to Hypo Real Estate would have a very limited impact on solvency. The Dexia board would confer again on Monday evening, a spokeswoman said.

In an accord struck just after 11 p.m. (5 p.m. EDT), German banks and insurers agreed to provide HRE with an extra 15 billion euro ($20.8 billion) credit line on top of a 35 billion package they had already committed together with the Bundesbank central bank, the German finance ministry said.

A government spokesman said there were no plans for high-level talks about Dexia.

Finance Minister Didier Reynders gave little away in a radio interview on Monday morning.

"In the coming hours we will look at the situation further, but it is too early now to say that Dexia needs a bank partner," Reynders told broadcaster RTBF.

Belgian daily De Standaard said on Monday the bank's French and Belgian operations were likely to be split, although a solution would have to be found for Financial Security Assurance (FSA), Dexia's loss-making U.S. bond insurance subsidiary.

(Reporting by Philip Blenkinsop; editing by Sue Thomas)