France, Belgium pump fresh capital into Dexia bank

Belgium and France have subscribed to a 5.5 billion euro injection of capital to bail out the Dexia bank, in line with a restructuring plan approved by the European Commission last week, a statement said Monday. \"In accordance with their undertaking, the Belgian and French states have today subscribed to the Dexia SA capital increase,\" the bank said. \"The Belgian state subscribed to 15,342,105,203 and the French state to 13,605,263,158 new preference shares in Dexia SA, thus bringing their holdings in the capital of Dexia SA to 50.02% and 44.40% respectively.\" The European Commission said the plan would wind up the core banking business while the remaining assets -- a development agency in France and the Belfius unit in Belgium -- would be put on a sound base. The plan, drawn up by major shareholders Belgium and France, along with Luxembourg, includes state guarantees worth 85 billion euros ($110 billion). In early November, France and Belgium agreed to inject 5.5 billion euros of fresh capital into Dexia to keep it afloat during its restructuring after the bank had to be bailed out first in 2008 and then again in 2011. Dexia bank operated a retail business in Belgium but its core business was financing public bodies and local authorities in France and Belgium, but the global financial crisis found it over-extended and unable to raise funding. France, Belgium and Luxembourg -- which held a small stake -- decided to break up Dexia in 2011 after it sought its second bailout. In its last results, for the third quarter, Dexia suffered a net loss of 1.2 billion euros, leaving it with negative shareholder funds, meaning it had no more capital.