Dexia Joins BNP Paribas Resisting Greek Losses
Dexia SA (DEXB), BNP Paribas SA and Societe Generale SA are resisting pressure from regulators to accept more losses on their holdings of Greek government debt amid criticism they haven’t written down the bonds sufficiently.The French may further guarantee some of the Belgian Dexia's obligations as a first step toward the ultimate breakup of Belgium.
While most banks have marked their Hellenic debt to market prices, a decline of as much as 51 percent, France’s two biggest lenders and Belgium’s largest cut the value of some holdings by 21 percent. The practice, which doesn’t violate accounting rules, may leave them vulnerable to bigger impairments in the event of a default, or if European governments force banks to accept bigger losses than signaled in July. The three would have about 3 billion euros ($4 billion) of extra losses if they took writedowns of 50 percent, data compiled by Bloomberg show....Much MORE
Here's FT Alphaville pointing out that a guarantee is only as strong as the guarantor:
...There is already a patchwork of state guarantees within Dexia’s capital structure but this new statement is an important move. Note the promise to “safeguard… creditors” with regard to Dexia’s heavily-discounted subordinated bonds for example.And the reaction of the stock:
And FT Alphaville questions whether the Rubicon has been crossed regarding liquidity guarantees for French banks in general… a train of thought that leads one to the sovereigns themselves and their ability to guarantee one EFSF facility....MORE
Dexia en chute encore, encore
What’s French for penny dreadful?
And ZeroHedge links to a handy chart from Reuters (click to enlarge):
With Dexia Done, Here Is Who Is Next: A Visual Euro Bank Liquidity Vs Funding Exposure Matrix
Now that the FT is reporting that as part of the ongoing emergency talks to rescue an expiring Dexia, one of the proposals is a spin off of a Dexia "bad bank" - something which worked for UBS, which is still a partial protectorate of Switzerland, but will most certainly not work for governmentless Belgium, the question is "who is next" Luckily, we have the following handy summary, courtesy of Reuters' Peter Thal Larsen who has pulled a chart from an Espirito Santo report, showing a 2-D matrix of liquidity (i.e. liquid assets as a % of wholesale funding assets), versus reliance on wholesale funding - the one component in European interbank markets which is now completely dead. Needless to say red is bad. And if one thinks that Dexia is about to file, then it may be last rites time for Soc Gen, BNP, Raiffeisen, and DnB Nor.