December 20, 2012 / 5:21 PM / in 5 years

Belgium cuts fee to guarantee KBC debt

BRUSSELS, Dec 20 (Reuters) - KBC Group said the Belgian government had cut the fee the bank pays for state guarantees on its debt, adding the change would not have a material impact on fourth-quarter results.

KBC and Belgium agreed in May 2009 the government would compensate KBC for 90 percent of potential losses on its holding of collateralised debt obligations (CDOs) and asset-back securities (ABS) after the first 3.2 billion euros ($4.2 billion).

KBC said on Thursday it had cut the underlying investment portfolio to 9.4 billion euros from 15.1 billion. It will have paid the government 1.2 billion euros by the end of the year, it said, while the state has not had to cover any losses.

The company said a revised agreement granted it a discount on the fee owing, depending on certain conditions and limited to a set maximum amount. “In other words, the government has included an incentive for KBC if KBC succeeds in significantly reducing the government’s exposure.”

KBC has now paid back 3.5 billion euros it received in direct state aid from the federal government during the 2008-09 financial crisis and plans to repay 1.17 billion of the 3.5 billion it owes to the regional government of Flanders. ($1 = 0.7555 euro) (Reporting By Philip Blenkinsop; Editing by Dan Lalor)

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