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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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