European Commission authorizes Belgium and France to convert Dexia preference shares into ordinary shares


On 19 September 2017, the European Commission approved the measures notified at the beginning of September 2017 by Belgium and France in favour of Dexia.

Both Belgian and French measures aim at converting preference shares into ordinary shares.

The aid was declared compatible with the internal market by the Commission on the basis of Article 107 §3 b) of the Treaty on the Functioning of the European Union, which allows the Commission to authorize aid to remedy serious disturbance in the economy of a Member State. This legal basis was used by the Commission to allow state aid in the banking sector following the financial crisis.

To remind you, from 2008 the Dexia group benefited from significant public support measures which were authorized by the Commission in February 2010 subject to implementation of a restructured plan. The aid granted by Belgium, France and Luxembourg in 2008–2009 took the form of a recapitalization (EUR 5.4bn), refinancing guarantees (EUR 135bn) and impaired asset measures (EUR 3.2bn). In 2012, Belgium and France provided further significant aid for the liquidation of the Dexia group, with existing ordinary shareholders sharing the full burden to limit the amount of State aid. The preference shares aimed at ensuring that both Member States would be repaid before the existing ordinary shareholders, in case the liquidation produced a profit.

As Dexia has been in liquidation since 2012, it is thus exiting the market. However, the bank is still subject to regulatory capital requirements and the conversion will enable Dexia to comply with the request from the European Central Bank. The Commission found that the conversion plan provides for new preferential rights for Belgium and France and that the ordinary shareholders’ participation will be diluted following the conversion of Belgium and France preference shares. Therefore, both Member States’ priorities in the liquidation will be preserved and the ordinary shareholders will not benefit unduly.