German Dexia unit also fighting for survival: report

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The German unit of troubled Franco-Belgian bank Dexia is also fighting for its survival due to heavy exposure in indebted European countries, news weekly Der Spiegel reports in its Monday issue.

The subsidiary Dexia Kommunalbank Deutschland AG made loans of 5.4 billion euros ($7.2 billion) to Greece, Italy, Portugal and Spain, which are all struggling with mounting debts, Spiegel said.

"The local lender took major risks in relation to its own paltry net worth," it said.

The report said German financial regulator Bafin had put pressure on the parent bank since 2010 to boost the unit's equity.

But liquidity problems led the entire company into turbulence this month. Spiegel said Bafin hoped the French state would save Dexia and, in the process, the German unit.

On Sunday, France, Belgium and Luxembourg announced they had reached a deal to dismantle Dexia, the first victim of the eurozone debt crisis.

"The proposed solution, which is the result of intensive consultations between all involved parties, will be submitted to the Dexia board, whose responsibility it is to approve the plan," a joint statement said without elaborating.

The board of directors was to meet at 1300 GMT.

© 2011 AFP

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