Last Thursday, the Belgian, Luxembourg and French government agreed on a plan to help out Dexia. The governments agreed on giving Dexia a yearlong guarantee on their new loans and deposits. Because of this plan, the shares of Dexia gained a lot today after a difficult period.
Our Prime Minister, Yves Leterme, said today that this guaranty give a lot of assurance to the investors. The investors don’t have to worry anymore about the liquidity of Dexia.
According to French Finance Minister Christine Lagarde, this plan shows us that the governments wouldn’t allow banks to go bankrupt, when these are so crucial to the financial system. Dexia will not be split up like Fortis, just a few days ago.
There are still some things unclear. For example, neither Dexia or the governments want to tell us how high the guaranty could go and how much each state will carry. For now the guaranty lasts till October 31, 2009, but the guarantee can be renewed for one year.
It is the first time for three European states to join and to make up a guarantee plan for a bank. Britain, Spain and Ireland also came together to guarantee their banking sector during the financial crisis. The three governments also decided to point out a new CEO for Dexia, because they were unhappy with the current situation. Pierre Mariani, is now the new CEO of Dexia and Jean-Luc Dehaene is the new chairman of Dexia.
It seems that the governments really do their best to maintain the position of the banks. I think this is a really good thing, because now the investors will have a lot more confidence. And as it already showed today, this has had a really good effect on the value of the shares of Dexia.
The only question I ask myself is: Where does the government takes the money from to build up this guarantee? Last week they already invested a lot of money into Fortis and also Dexia. I hope that the government can keep the promise she has made to the investors.
Source: CNN.com : Dexia shares soar on government pledge
http://edition.cnn.com/2008/BUSINESS/10/09/belgium.dexia.guarantee.ap/index.html
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I think this guarantee is a good signal to the investors. It means the three countries believe in Dexia. People who will take a risk could be richly rewarded when the bank comes out of the financial crises. I agree with Jens when he asked himself where the government gets all this money. Another good point is the fact Dexia stays one company and it isn’t split up like Fortis.
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