On Tuesday 19 September, the European Commission approved the plan presented by the Belgian and French states to convert preferential shares in Dexia into ordinary shares, under the EU state aid rules.
Since it was placed into liquidation in 2012, the Franco-Belgian bank has no longer been present on the markets and is not competing on other market segments. It is, however, still subject to regulatory capital requirements.
Through this measure, the Belgian and French authorities aim to ensure that Dexia's capital ratios remain above these regulatory thresholds, in line with the requirements of the European Central Bank (ECB), with the bank's preferential shares to lose their status as optimum-quality equity (Common Equity Tier 1, or CET1) on 1 January 2018.
Readers may recall that Belgium and France organised the resolution of the Dexia group in 2012 (see EUROPE 10727), in particular by creating preferential shares, and that the plan was approved by the Commission on 28 December of the same year (see EUROPE 10758). The preferential shares made it possible to ensure that any profit made was paid first of all to the states, to reimburse them for the support measures, before being distributed to ordinary shareholders, should the liquidation procedure return any profits. This meant that the ordinary shareholders took a share of the burden, thereby limiting the amount of state aid necessary.
The Commission notes that the measure approved on 19 September includes new preferential rights in favour of Belgium and France, which ensures that any profits are always returned to the two states as a priority. Concluding, therefore, that the measure will not give the ordinary shareholders any undue benefit to the detriment of taxpayers, the Commission has ruled that the plan is compatible with EU state aid rules. (Original version in French by Lucas Tripoteau)