The governments of Belgium, France and Luxembourg will guarantee all new
borrowings and bond financings of the troubled lender Dexia until November next
year, the bank said yesterday.
"The three governments jointly undertook, from today until October 31, 2009,
to guarantee new interbank and institutional deposits and financing as well as
new bond issuance intended for institutional investors, with a maximum maturity
of three years, raised by Dexia SA, Dexia Banque Internationale a Luxembourg,
Dexia Bank Belgium and Dexia Credit Local," the Belgian-French bank said in a
statement.
The guarantee, which may be renewed for a term of one year," gives an
assurance to depositors that Dexia will have sufficient liquidity to meet its
obligations towards its clients," the Dexia Group said.
The guarantee, which needs to be approved by the parliaments of the three
countries, will be "subject to remuneration reflecting the advantage thus
obtained by the entities of the Dexia Group concerned," it added.
Dexia is the world's largest lender to local governments. It is the main
source of finance for Belgian and French municipalities.
The latest move of the three governments followed a massive bailout last week
when Belgium, France and Luxembourg led a 6.4 billion-euro (8.8 billion US
dollars) capital infusion for Dexia to prevent its collapse.
Meanwhile, Belgian Prime Minister Yves Leterme announced on Thursday that the
government will also guarantee new borrowings of all other Belgian banks over
the coming year.
The announcements came just before the opening of trading on the Brussels
stock exchange. The news sent the Bel-20 blue chip index higher in early trading
and Dexia's shares shot up by 24 percent.
Editor: Yan