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EU clears Belgium's euro3.5 billion bailout for KBC

EU clears Belgium's euro3.5 billion bailout for KBC

Belgium's KBC bank won European Union approval Tuesday to receive a euro3.5 billion ($4.95 billion) state recapitalization and a government guarantee to cover potential losses for six months.
EU regulators said their approval was temporary and Belgium must draw up an in-depth restructuring plan for the bank within three months to show how it plans to counter distortions of competition because KBC has received more state help than rivals elsewhere.
This could see KBC ordered to slim operations and shed units or jobs to compensate for the financial advantage it gets from euro9 billion in state recapitalizations since the banking crisis froze credit in October.
The EU executive said it would also investigate the state guarantee that aims to shield KBC from more losses from securitized investments once valued at euro20 billion.
The European Commission said it had decided "for reasons of financial stability not to raise objections for six months" but would probe the valuation of the investments, how the losses would be shared between the bank and the state, how much KBC will pay in return and how it manages the assets.
The Belgian guarantee plan aims to lift some of the burden of troubled assets from KBC's balance sheet and improve its capital ratio _ a key measure of a bank's health and ability to cope with losses.
Under the plan, KBC would bear the first euro3.2 billion of potential losses but share a further euro2 billion in losses with the Belgian state absorbing euro1.8 billion in return for new KBC shares. Belgium would also take on 90 percent of further losses up to euro14.8 billion.
KBC will pay the government euro170 million every six months for the entire guarantee.
The bank slashed the estimated value of its securities investments by euro3.8 billion in the first three months of the year. It also wrote down euro4 billion of securities last year.
KBC's quarterly losses have been deepening since the third quarter of last year, when it lost euro906 million. It lost another euro2.62 billion in the fourth quarter and euro3.6 billion in the first three months of 2009.
KBC had been viewed as one of the more prudent Belgian banks and was the last to seek government help late last year following the near-collapse and dismemberment of the country's largest bank Fortis and the rescue of French-Belgian lender Dexia.
It employs around 50,000 people and has 12 million customers. It made a profit of euro3.28 billion in 2007.


Updated : 2021-05-13 15:01 GMT+08:00