Dexia Gets a Fence to Prevent Contagion to Other European Banks

Dexia (DXBGF.PK), a Franco-Belgian banking group, is under pressure due to its exposure to ‘toxic’ assets — primarily Greek sovereign bonds. Its shares have dropped amid concerns about its liquidity and Greek exposure.

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The Belgian (NYSE:EWK) and French (NYSE:EWQ) governments are both shareholders in the group, and according to the latest reports, have stepped forward to offer guarantees for financing the bank. According to Belgian finance minister, Didier Reynders, “the two governments are following the situation and will intervene if necessary.”

The group is expected to resort to asset sales to mitigate the losses on the Greek assets, and likely to sell its French municipal lending unit, Credit Local. The move is largely seen as a bailout to prevent contagion to other European banks (NYSE:KBE).

Keep your eye on shares of European banks UBS (NYSE:UBS), Deutsche Bank (NYSE:DB), Barclays (NYSE:BCS), Royal Bank of Scotland (NYSE:RBS), Lloyd’s (NYSE:LYG), and Credit Suisse (NYSE:CS).

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