State aid probe into Dexia extended–Comm’n concerned with the orderly resolution plan

The European Commission is extending its in-depth investigation into recapitlization and guarantees granted to Dexia in 2008 and 2009 by France, Belgium and Luxembourg The probe is extended to September 30, 2012 so that the Commission may examine the orderly resolution plan of the bank that was submitted by the three countries in March of this year. Until then, the Commission approves extending the temporary gurantee of €45 billion for Dexia granted by the Member states that was set to expire on May 31.

Under the orderly resolution plan, Dexia Municipal Agency will be sold to the French State as a going concern. However, the Commission is concerned that the aid will be used to perpetuate the ongoing existence of what is a failed business model. The Commission is also concerned with the fact that remuneration under the orderly resolution plan is close to zero. In addition, the Commission will be taking a closer look at Arcofin’s contribution to Dexia recapitalization.

Full content: EC Press Release

Related content: Stability and Competition in EU Banking During the Financial Crisis: The Role of State Aid Control (Gert-Jan Koopman, DG Comp)

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