 European Banking Union D: Cross-Border Resolution--Dexia GroupJournal of Financial Crises, 2019, vol. 1, issue 3, 172-188 Abstract: In September 2008, Dexia Group, SA, the world's largest provider of public finance, experienced a sudden liquidity crisis. In response, the governments of Belgium, France, and Luxembourg provided the company a capital infusion and credit support. In February 2010, the company adopted a European Union (EU)-approved restructuring plan that required it to scale back its businesses and cease proprietary trading. In June 2011, Dexia withdrew from the government-sponsored credit support program before its expiration date, and in July, the company announced that it had passed an EU stress test. However, just three months later, Dexia wrote down its substantial position in Greek debt and posted its largest loss ever. The company's shares plummeted, and its Common Equity Tier 1 capital became negative. To avoid a disorderly resolution, the governments of Belgium, France, and Luxembourg nationalized Dexia's assets. This case examines the attempted rescue of Dexia, provides an analysis of the successes and failures of that cross-border effort, and discusses the impact that Dexia's holdings of sovereign debt had on the company's viability and on the ability of its host countries to rescue it. Keywords: Dexia; ECB; EU; Global Financial Crisis; Resolution; CET1; Nationalization; stress tests (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ysm:ypfsfc:131010 Access Statistics for this article More articles in Journal of Financial Crises from Yale Program on Financial Stability (YPFS) Contact information at EDIRC. |
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