France sees Dexia solution by Thursday
PARIS (AP) — A big rescue operation looks imminent for Dexia SA after France's finance minister indicated that a partial solution to save the part French, part Belgian bank could be announced as soon as Thursday.
Francois Baroin said Wednesday that Dexia "cannot continue in its present form, that is incontestable" and that the bank's supervisory board would unveil "a very important response" to the crisis on Thursday.
He also told French radio station RTL that a solution would likely involve French state-owned banks CDC and Banque Postale taking over Dexia's municipal lending operations.
"We are working on a solid, structured solution," Baroin said.
The French government is under acute pressure to save Dexia as the bank is one of the country's largest lenders to towns and cities.
Dexia shares have recovered some of their recent losses but remain sharply lower on the week. By early afternoon, they were up 6.7 percent in Brussels.
Dexia has been at the forefront of investor concerns over its exposure to potentially bad debt from Europe's most indebted countries. With the markets bracing for a Greek debt default soon, investors are concerned about what bonds Europe's banks are holding and banks themselves have become reluctant to lend to one another.
On Tuesday France and Belgium promised to prop up the bank and insure every cent of its deposits in response to a calamitous decline in the bank's share price over the past couple of days.
At one point Tuesday the bank's share price plunged nearly 40 percent, prompting France and Belgium to launch crisis-management initiatives designed to prevent a complete rout.
Dexia stock began to plummet Monday after Moody's warned it could be downgraded because of mounting difficulties it is facing getting short-term funding. In the wake of the warning, Dexia's board of directors called an emergency meeting.
On Tuesday, Dexia's board of directors issued a statement ordering the bank's management to take steps, in consultation with the Belgian and French governments, "to resolve the structural problems weighing on the group's operational activities and offer new growth prospects."