THE BOARD of Belgian-French financial group Dexia was planning to finalise a response to the financial crisis last night as its shares crashed to a record low on a report that it planned a capital hike.
The bank's shares in Brussels ended down 29.7 per cent at €7.07, having hit a 12-year low of €6.75. Its market value fell by some €4 billion ($5.7 billion) to €8 billion.
The price of Dexia five-year credit default swaps (CDS) - which reflect a market view on the likelihood of it defaulting on loans - more than doubled in the past month to 468 at close on Friday from 206.10 on August 27th.
The Fortis CDS closed at 640 on Friday and BNP Paribas at 87 because its balance sheet is healthier.
France's Le Figaro newspaper reported yesterday that Dexia planned a capital increase soon.
Dexia declined to comment on the report, but a spokesman did say the group's liquidity was "very healthy".
Dexia's board held a special conference call on Sunday to discuss rival Fortis, which was partially nationalised by the Belgian, Dutch and Luxembourg governments.
The Dexia board held another conference call yesterday evening, a spokesman said, adding it continued to evaluate its response to the global financial market crisis.
"With the acceleration of the financial crisis over the past two weeks, Dexia is following the situation closely," he added. "In that framework, the management and the board are continuing to evaluate what will be the response by the group.
"The liquidity situation at Dexia is very healthy and the recent events around Fortis have no impact at all."
Belgian prime minister Yves Leterme held a meeting of core cabinet members and then hosted representatives of the regions to discuss Dexia.
Dexia has a core of shareholders holding 51.9 per cent of the company, including French state-controlled Caisse des Dépôts (CDC) with 11.7 per cent and Belgium's communal holding group with 16.2 per cent.
Mr Leterme said savers should be assured that their money was safe and Belgium would support Dexia if necessary.
"Bearing in mind the specific circumstances of the company Dexia, which is different from Fortis, we will fulfil our responsibilities," he told Dutch-language broadcaster VRT.
Earlier, finance minister Didier Reynders told French-language radio RTBF that Fortis had not received preferential treatment.
"What we do for Fortis, it's clearly what we would do for all the other Belgian banks," he said without mentioning any banks by name. - ( Reuters)
