Dexia during the Crisis
John Jackson
Boston University
Leadership in Evolution - A Historical, Social, and Ethical Perspective
MET LD 630
Mihaela Ionasc
February 29, 2012

Dexia during the Crisis
Dexia was among the earliest banks to be bailed out at the start of the financial crisis, when the short-term money markets it relied on to finance long-term lending to French municipalities seized up after the 2008 collapse of Lehman Brothers, the US investment bank.”(Pignal, Daneshkhu, & Thompson, 2011) The Governments of France, Belgium and Luxembourg provided the bank with €6.4 billion of capital in the bank. The bank underwent restructuring and the governments provided guarantee of funds. Dexia was not out of trouble as they were short of funds as they had €96 billion in short term loans that was not readily available. To make matters worse proposed banking rules sought to impose alignment between how loans are made and how the group financed itself. The proposed laws would have made Dexia’s current business model illegal. Dexia had loaned money to Greece, Italy and other financially troubled countries leaving them with potential losses that would reduce the banks financial stability even more. Dexia was not well known to consumers prior to the debt issue, the bank primarily loaned money to local governments and it had assets valued at more than €700 billion, which was more than the entire Greek financial system.
In 2010, Dexia reorganized and downsized to try to overcome the results of the financial crisis. The European Commission approved the changes with conditions attached that Dexia restructure to prevent unfair competition and government support was justified.(n.d, 2012) By 2011 the bank continued losses forced the Belgium, France and Luxembourg governments to make additional changes and the bad bank was formed which received funding guarantees of