Belgium and France: Dexia Group Capital Injection, 2008

Dexia Group (Dexia, or the Group) was a banking and insurance conglomerate that specialized in public financing with major operations in Belgium, France, and Luxembourg. Following the collapse of Lehman Brothers in mid-September 2008, Dexia faced a liquidity crunch as wholesale funding markets froze. Faced with insolvency concerns, authorities from the bank's three primary markets, Belgium, France, and Luxembourg, conducted overnight negotiations to agree on capital injection terms. On September 30, 2008, authorities and the bank's board of directors announced a EUR 6.4 billion (eventually EUR 6 billion) capital injection intended to restore Dexia's solvency and maintain systemwide stability. The capital injection accompanied a debt guarantee and was premised on the creation of a restructuring plan to reduce the bank's risk portfolio and prioritize historical business lines. The European sovereign debt crisis of 2011-2012 caused another liquidity crisis at Dexia, leading to the creation of an orderly resolution plan and a further EUR 5.5 billion (USD 7.3 billion) capital injection from France and Belgium on December 31, 2012. This left the majority of Dexia's shares with the authorities of these two countries, and the bank remains in orderly resolution as of the writing of this case study. Belfius, the recapitalized and rebranded Belgian arm of the bank, is 100% owned by the Belgian government. It is a systemically important financial institution as Belgium's second-largest retail bank, with an equity book value of EUR 11 billion as of year-end 2022.