Last summer Dexia it was among the banks that passed with flying colors in the stress tests of the European Banking Association: the worst-case scenario simulated by the examiners indicated a drop in the Core Tier 1 ratio from 12,1% to 10,4%. Thus well above the 5% rejection limit, below which eight banks fell, and 6% below which fell another sixteen banks. On the other hand, only eight banks had, in the worst case scenario, a Core Tier 1 result higher than that of Dexia, 9% of the total.
The rescue in extremis of the Franco-Belgian institute dramatically confirms, therefore, the lack of credibility of the stress tests which did not envisage the hypothesis of a default in the euro area. Belgium will pay four billion euros for the Belgian branch of the institute and will provide guarantees for 60% of the assets at risk destined to flow into a "bad bank" and estimated at 90 billion euros. The second consideration, no less disturbing, concerns France's resistance to shouldering more than 35% of Dexia's burden.
It is the confirmation of the main concern of Paris: to avoid that the bailouts of the banks at the expense of the State end up with the jeopardize the triple A enjoyed by France. A setback that is just around the corner but that Nicolas Sarkozy tries to avert in every possible way, also due to the political impact on public opinion. For the time being, however, the clouds seem to be receding: Stndard & Poor's confirmed its top rating today in Paris.
Meanwhile, this morning both Société Générale and Bnp Paribas denied a report published by the Journal de Dimanche in which it is estimated that 14,8 billion of public money will be needed to recapitalize the two institutions: according to JDD, Bnp Paribas needs 9,4 billion against 5,4 billion for Socgen.
This morning, meanwhile, the Frankfurter Allgemeine Zeitung calculates that, according to the calculations made on the sidelines of the Franco-German meeting, it appears that the first five French companies need a capital injection of around 20 billion euros. Deutsche Bank too, according to Faz, will have to be helped by the state. These numbers serve to explain the dilemma that separates Paris from Berlin. Angela Merkel and Finance Minister Wolfgang Shaueble insist on a scheme which provides for the banks: a) bailout by national states; b) alternatively the intervention of the European fund EFSF; c) the joint intervention of the EU and the IMF in case of further needs. For France, on the other hand, the direction and financial responsibilities must be entrusted immediately to the EU and the ECB. At stake, as usual, is the need to introduce a shield to defend the country's rating.
