No new action needed at 2 Belgian banks failing ECB test

By Philip Blenkinsop
0

By Philip Blenkinsop BRUSSELS (Reuters) - Belgium's central bank said on Sunday that neither of the country's two banks that failed the Europe-wide health check would need to take extra measures to boost their capital. The European Central Bank found that Franco-Belgian lender Dexia had a capital shortfall of 339.4 million euros ($430 million) at the end of 2013 and that AXA Bank Europe was 200.2 million euros short. Belgium's central bank said that the ECB had taken account of Dexia's specific situation following its break-up and state bailout in 2011. State guarantees provided for the lender meant it could hold sovereign bonds to maturity, so unrealized losses on such holdings at market value were not relevant. With this taken into account, Dexia's core tier 1 ratio would be 7.6 percent, above the ECB's "adverse scenario" threshold of 5.5 percent. "Therefore, the stress test exercise does not affect the current restructuring plan of Dexia approved by the European Commission in 2012 and no additional action is required from the group," Belgium's central bank said in a statement. AXA Bank Europe, the Belgian banking arm of French insurance group, secured 225 million euros in extra funds from its parent last month. Belgium's central bank said that meant it met the requirements set by the ECB and no longer needed to take additional measures to strengthen its solvency position. Belgium's four other banks, Belfius, Investar, KBC Group and Bank of New York Mellon all passed the ECB's test. Dexia, 95 percent state-owned, was once the world’s largest municipal lender, but has been steadily stripped of its banking activities and is now a holding of loans and bonds being run off. It has steadily reduced its losses from a peak of 11.6 billion euros in 2011 to a loss of 1.1 billion euros last year. France and Belgium had to pump in 5.5 billion euros in 2012, Dexia's third bailout in four years. Belgium, France and Luxembourg are currently providing guarantees for some 76 billion euros of its borrowings. The ECB recognized a year ago that Dexia was a special case and unlike any of the other 129 euro zone credit institutions. (Reporting By Philip Blenkinsop; editing by Barbara Lewis)

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