Dexia shares in new slump as Greece worries continue

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1.08	- -0.41	- -27.52

They fell 37% at the open on Tuesday - adding to a 10% Monday drop prompted by an alert by ratings agency Moody's - but rallied back to a mere 21% down.
Dexia called an emergency board meeting on Monday night.
The governments of France and Belgium, who are joint shareholders in Dexia, moved to guarantee its debts, after finance ministers also met on Monday.
The commitment raised questions over the heavily-indebted Belgian government's own solvency. Belgium's 10-year cost of borrowing jumped from 3.7% to 3.8% in bond markets on Tuesday.
Separately, the French and Belgian central banks also stated that they "fully support" Dexia, indicating that they will provide whatever borrowing is needed by the bank to ensure it does not run out of cash.
The bank is to be reorganised, with problematic loans being moved into a "bad bank" that will be more closely supervised by the two governments.
Credit Local, a unit of the bank responsible for lending to French local governments, is also expected to be sold off.
A joint statement from the countries' finance ministers said: "In the framework of Dexia's restructuring, the governments of France and Belgium, in coordination with our central banks, will take all necessary steps to ensure the protection of depositors and creditors."
Credibility The two ministers, who were meeting at a wider eurozone finance ministers' meeting in Luxembourg, have been discussing ways to support the bank.
The crisis at Dexia comes just weeks after the bank comfortably passed stress tests by regulators of all the major European banks, further undermining the credibility of the entire exercise.
Market concerns over Greece's ability to repay its debts were further heightened on Monday night as eurozone finance ministers again delayed a decision on giving Greece its next instalment of bailout cash.
It came after Greece said it would not meet this year's deficit cutting target.
Eurozone banks have been hit by cash outflows since the summer amid fears that Greece, and possibly other governments, may ultimately default on their debts, and even exit the eurozone, leaving their lenders sitting on big losses.
Dexia's exposure to Greek government debt totals 3.4bn euros ($4.5bn; £2.9bn). Its total exposure to Greece - including to private-sector Greek borrowers - is 4.8bn euros.
It has already written off 21% of its Greek debts, but market prices now suggest the eventual loss to lenders could be in excess of 50% of the amount owed by Greece.
The bank is partly-owned by the French and Belgian governments, after it received a 6bn-euro joint bailout at the height of the financial crisis in 2008.