This latter division also includes Dexia's shareholding in online banking venture Zebank. The CDC had been formed in , with the restoration of the French monarchy and the need to provide funding and financial management assistance for institutions and government bodies. Part of the CDC's mandate was to manage retirement funds for France's body of civil servants. The CDC also acted as holder of escrow accounts. The CDC began its municipal lending activity in , when it provided an equity loan to the Port of Dunkerque.
In , the CDC was given a new national stature when France's parliament decided to join the Caisse d'Epargne savings bank , which had been created in , to the CDC. By then, the Caisse d'Epargne had grown to a network of more than branches across France.
With access to these funds, the CDC's role as funding agency for France's infrastructure projects began in earnest. Starting in the s, the CDC was given charge of the country's first retirement pension fund. In , the CDC was mandated to provide funding for the expansion of the French national public school system, particularly in financing the construction of primary schools, and later junior high and high schools, throughout the country's smaller towns and villages.
In Belgium, a banking body similar to CDC had been founded in The CCB gained still more prominence after World War I, as communities turned to the bank to help in the rebuilding effort.
Similar assistance was needed following World War II. Soon after the end of that war, the CCB began opening branch offices, expanding beyond public works funding into private and corporate banking activities. By the end of the 20th century, the CCB operated more than 1, branch offices. One of the first of the young duchy's banks, and given the right to issue banknotes, the BIL initially turned its investment activities to Germany—the two countries had long been united in the Zollverein custom union, while Luxembourg shared the German mark as its own currency.
In , Luxembourg left the Zollverein in favor of a new customs treaty with Belgium—and later formed the Benelux economic unit with the Netherlands.
BIL played a prominent role in the development of Luxembourg as a financial capital, and helped in establishing the Luxembourg stock exchange in Nazi occupation of Luxembourg ended BIL's activity for the duration. The approach of full European economic union—beginning with the Maastricht treaty of and culminating with the launch of the euro at the end of the decade—signaled the start of a new era of European banking.
The CCB's own international expansion began in , when the company set up the Cregem International Bank in Luxembourg, specializing in assets management. Over subsequent years, Dexia continued to expand. It also formed a joint venture with the Royal Bank of Canada combining their institutional investor services units. Dexia's bigger-is-better strategy first came unstuck in The collapse of the US investment bank Lehman Brothers caused lenders worldwide to become wary of lending to each other.
It had been caught out by the sub-prime mortgage crisis. Finding itself unable to borrow placed Dexia in an impossible situation. It relied on being able to take out short-term loans to finance the longer term credit it offered public authorities. On 30 September the governments of Belgium, France and Luxembourg announced they were taking control of the business with a 6.
According to France's finance minister Christine Lagarde, there had been a risk that Dexia "would not make it through the day, which would have represented a systemic risk for the stability of the financial system".
The move in had been supposed to put the business on safe ground, yet three years later Dexia requires a second rescue. While problems in the US prompted the first intervention, the eurozone debt crisis is at the root of Dexia's current difficulties. The firm has 3. Analysts estimate it has a further In spite of all this, Dexia passed July's banking stress tests carried out by the European Banking Authority.
This happened because the bank had a core tier one capital ratio of The measure weighs up a bank's top-notch assets against its more risky holdings and is used to gauge its financial strength.
So on 15 July, the bank issued a press release headlined " EU-wide stress test results: no need for Dexia to raise additional capital". The problem is that the tests did not take into account a scenario in which Greece might default on its bonds. While the bank should have enough capital to absorb such writedowns, analysts are worried about the knock-on damage to other investments owned by the bank that would be caught up in the turmoil.
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