* Belgium, EU discuss "special treatment" for moribund Dexia
* EU stress tests might point to need for further capital
* Belgium, France keen to avoid new bailout as Dexia winds
By Laura Noonan and Philip Blenkinsop
DUBLIN/BRUSSELS, May 22 Belgian officials could
soon conclude talks with EU and euro zone financial regulators
that might see France and Belgium avoid having to pour more
public money into crippled bank Dexia if it fails an EU stress
test on its balance sheet.
Sources familiar with the process told Reuters that talks on
"special treatment" in the tests for publicly owned
Franco-Belgian Dexia have intensified and are nearing their end.
One said EU negotiators had already made unspecified
The Belgian and French governments have already bailed out
Brussels-based Dexia to the tune of nearly 12 billion euros
($16.5 billion) since the financial crisis, taking control of it
in the process, and are keen not to pump in more to a moribund
institution that is already in the process of being wound up.
That EU-approved break-up plan makes Dexia unique among the
128 major euro zone banks being reviewed by the European Central
Bank (ECB) and the 124 EU banks that are being subjected to
stress tests by the European Banking Authority (EBA). Both
bodies have said they would take account of that "special
situation" in their assessments.
However, having made mention of that only in footnotes to
documents, they have given no details and the comments from
sources to Reuters this week are a first confirmation that talks
are progressing between European officials and representatives
from Belgium, whose central bank is Dexia's regulator. It is
unclear what role, if any, French officials have had in the
Dexia's chief executive warned in March that the bank was at
risk of failing the EU review and might need to raise capital
again - money that would most likely come mainly from the French
and Belgian treasuries which are currently guaranteeing almost
80 billion euros of Dexia's borrowings.
The stress tests and a related review by the European
Central Bank have already prompted several banks to raise funds,
most recently Deutsche Bank, which on Sunday
announced plans to raise 8 billion euros. (ID:nL6N0O40WU)
One source familiar with the Dexia process said a concession
had been made in recent days that would make the review of
Dexia's books less onerous than the review of the other banks'
the ECB is assessing. The source declined to give details.
A second source stressed that details of how Dexia would be
treated had not yet been finalised.
Dexia, the ECB, EBA and Belgium's central bank all declined
One of the sources who spoke to Reuters said that Dexia,
formed by a Franco-Belgian merger in 1996, was a unique case and
its treatment should not have implications for other banks which
have been arguing against various elements of the stress tests.
Belgium, France and other shareholders put 6 billion euros
into Dexia at the height of the global financial crisis in 2008.
The bank subsequently secured guarantees for its borrowings from
the two states and, to a lesser extent from Luxembourg. These
now total some 79 billion euros.
Dexia has said it aims to reduce that to 45 billion euros by
the start of 2015. Belgium and France paid in another 5.5
billion euros in total in 2012, effectively nationalising Dexia
after consistent losses had eaten into its assets.
($1 = 0.7318 euros)
(Editing by Alastair Macdonald)