BELGIUM: Belgian central bank clears two banks after failing ECB test

Record ID: 565620

  • Title: BELGIUM: Belgian central bank clears two banks after failing ECB test
  • Date: 26th October 2014
  • Summary: BRUSSELS, BELGIUM (OCTOBER 26, 2014) (REUTERS) EXTERIOR OF THE NATIONAL BANK OF BELGIUM MAIN ENTRANCE OF THE NATIONAL BANK LUC COENE AT NEWS CONFERENCE VARIOUS SCREEN SHOWING DETAILS OF THE STRESS TEST LUC COENE AT PRESS CONFERENCE SCREEN SHOWING DETAILS OF THE STRESS TEST JOURNALIST AT NEWS CONFERENCE (SOUNDBITE) (French) GOVERNOR OF THE NATIONAL BANK OF BELGIUM LUC COENE, SAYING: "Significant de-risking by selling high risks products and cost-cuttings were performed since the beginning of 2014. This, resulting in 90 millions euros, combined with the capital measures in 2014 securing 225 millions euros, we then reach a level above the minimum so that AXA doesn't need to take extra measures." JOURNALISTS AT NEWS CONFERENCE LUC COENE AT NEWS CONFERENCE JOURNALIST TAKING NOTES JOURNALISTS AT A NEWS CONFERENCE (SOUNDBITE) (English) GOVERNOR OF THE NATIONAL BANK OF BELGIUM LUC COENE, SAYING: "The impact of the AQR (Asset Quality Review) is taken into the whole exercise. This means for Dexia a certain shortfall that is taken into consideration but that shortfall does not apply because it's based on a hypothesis that you have to liquidate assets to finance yourself. With the existence of the government guarantee that's not applicable. So they have enough resources to absorb all the other elements without any problem." EXTERIOR OF AXA BANK IN BRUSSELS AXA LOGO EXTERIOR OF AXA BANK AXA LOGO
  • Embargoed: 10th November 2014 12:00
  • Keywords:
  • Location: Belgium
  • Country: Belgium
  • Topics: Finance
  • Reuters ID: LVAEI7YTW7DF5TK2JG5SPU1YXTEI
  • Story Text: 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.
    But Belgium's central bank said on Sunday (October 26) that neither of the two would need to take extra measures to boost their capital.
    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.

    "Significant de-risking by selling high risks products and cost-cuttings were performed since the beginning of 2014. This, resulting in 90 millions euros, combined with the capital measures in 2014 securing 225 millions euros, we then reach a level above the minimum so that AXA doesn't need to take extra measures," said governor of the national bank of Belgium Luc Coene.
    He added that the ECB had taken account of Dexia's specific situation following its break-up and state bailout in 2011.

    "The impact of the AQR (Asset Quality Review) is taken into the whole exercise. This means for Dexia a certain shortfall that is taken into consideration but that shortfall does not apply because it's based on a hypothesis that you have to liquidate assets to finance yourself. With the existence of the government guarantee that's not applicable. So they have enough resources to absorb all the other elements without any problem," Luc Coene said.
    State guarantees provided for the lender meant it could hold sovereign bonds to maturity, so unrealised 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.
    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 recognised a year ago that Dexia was a special case and unlike any of the other 129 euro zone credit institutions.
    Belgium's four other banks, Belfius, Investar, KBC Group and Bank of New York Mellon all passed the ECB's test.
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