Dexia board, national leaders, mull bank's breakup

By the Associated Press | October 9, 2011 | 8:25 AM EDT

BRUSSELS (AP) — The board of the troubled French-Belgian bank Dexia is scheduled to hold a crisis meeting Sunday in Brussels to discuss the possible breakup up the bank, which is facing a liquidity crisis.

Dexia SA is in negotiations to sell off its Luxembourg affiliate to a group of international investors and the Luxembourg government, in what may be the first step in a partial breakup of the bank. Dexia has significant exposure to Greece, Italy, and Spain, countries that investors fear might default on their debts.

The French and Belgian prime ministers were also meeting Sunday in Brussels, along with the finance minister of Luxembourg, to finalize a plan to protect the bank's depositors. Both countries became part owners of the bank when they bailed it out in 2008.

"We are ready to enter the final stretch of negotiations," Belgium's caretaker Prime Minister Yves Leterme in advance of the meeting, according to La Capitale newspaper.

Finding a solution is particularly urgent for Belgium because on Friday Moody's Investors Service placed the country's Aa1 rating on review for possible downgrade, due in part to the expected expense of guaranteeing that Dexia's depositors will lose no money.

After Dexia's shares plunged last week amid fears it could go bankrupt, the French and Belgian governments stepped in and guaranteed its financing and deposits. The bank said in a statement Friday that trading in its shares would remain frozen until it could "communicate more precisely on the various choices and options concerning the future of the group."

A spokesman said bank officials would hold a press conference Sunday evening or Monday morning.