Last Friday, financial services group Dexia SA announced that it had reached an agreement with the European Commission relating to its restructuring plan. Dexia had previously received approximately €6.4 billion in bailout money from Belgium, France and Luxembourg. Pursuant to the negotiated restructuring plan, Dexia will:
- Reduce its balance sheet by 35% by 2014 from 2008 levels;
- Divest its activities in Italy, Spain and Slovakia, and its insurance-related business in Turkey (although it will keep its Turkish retail bank, Denizbank);
- Not make acquisitions or pay dividends until the end of 2011;
- Cease its reliance on state guarantees on funding by June 30, 2010; and
- Reduce its short-term borrowings to 10% of total liabilities by 2014.
Dexia indicated that regulators have not imposed any limits on management pay at Dexia.
Dexia stated that it expects the majority of its revenues to come from retail banking in the future, with about 20% coming from asset management services and another 20% coming from its financing work for government authorities.
Although much of the restructuring deal has been agreed upon, the plan still must be finalized and approved by the new EU Competition Commissioner, Joaquin Almunia.