Dexia: Belgium to create ‘bad bank’ for assets

Belgium approved Tuesday the creation of a “bad bank” to house assets at risk at Franco-Belgian bank Dexia, whose financing the two countries had guaranteed on reports that it was to be broken up.

“There was an agreement to isolate past charges, coupled with a need for guarantees from the Belgian and French states in order to guarantee the activities of Dexia Bank Belgium,” Prime Minister Yves Leterme said after an late-night emergency government meeting.

Speaking at the same press conference, Finance Minister Didier Reynders said that “all that concerns the past, notably long-term loans agreed with local authorities, will be guaranteed by the two countries.”

The goal is to isolate 95 billion euros ($129 billion) worth of risky assets that the bank has been trying to get rid of for years, he said.

“There will of course be a disposal of assets by various countries, but our goal is to consolidate, reinforce and secure (Dexia’s) banking activity in Belgium, as our French colleagues will do in France,” Reynders said.

“All of this will no doubt lead to all sorts of negotiations and contacts, but the commitments taken by both the French and Belgian authorities are very clear and were confirmed tonight,” Reynders said.

Both ministers stressed Dexia’s Belgian customers had “nothing to worry about” when it came to their savings.