It was a wild weekend for the banking sector, and some Canadians may have missed some of the big moves. For good reason: Turkey was on the table.
In case you were too busy with family, or got too caught up in your meals, here's a primer on what went down.
The Belgian government has agreed to nationalize the domestic operations of Dexia -- known as Dexia Bank Belgium -- for €4-billion. The division at hand includes both a large retail bank and a group that lends to local governments. Belgium has also provided a state guarantee, alongside France and Luxembourg, to offer Dexia funding up to €90-billion for 10 years.
Belgium will cough up 60.5 per cent of the guarantee, worth €54-billion, while France will cover 36.5 per cent and Luxembourg 3 per cent.
As that deal gets sorted out, news that Royal Bank of Canada is looking to buy out Dexia from its joint venture in RBC Dexia Investor Services. An official with the Luxembourg government said RBC intends to use its right of first refusal to buy the remaining 50 per cent of the joint venture from Dexia’s Banque Internationale Luxembourg (BIL). RBC has yet to comment on the matter.
More asset sales of this sort can be expected, according to a new report put out by KPMG, which estimates that European banks will have to sell off more than €30-billion worth of assets in order to raise capital. These banks are under pressure from regulators to unload part of their balance sheets and create liquidity. It has been reported that private equity firms such as Apollo Global Management LLC have been out fundraising to create funds that can buy these European assets.
Still on the European front, the leaders of Germany and France met over the weekend and announced they expect to have a proposal on how to fix the big mess before the G20 meets in early November. Chancellor Angela Merkel and President Nicolas Sarkozy hinted at recapitalizing the banks, but provided few specifics and offered no insight into how much money could be injected.
Finally, over in China, the country's sovereign wealth fund is buying more shares of China's 'Big Four' banks to counteract plummeting stock markets. The share purchases are the first by Central Huijin Investment Co. since the 2008-2009 financial crisis, according to Reuters. The four banks affected are Agricultural Bank of China, Industrial and Commercial Bank of China, China Construction Bank Corporation and Bank of China.
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