Why we need tumbrils: the executives of Dexia Bank played the game like American banksters. A big part of the Eurozone mess, but unlikely it’s the biggest.
The report lists a number of infractions committed by both, DCL’s pre-bailout management and post-bailout management. Among them:
– DCL gave false financial information to the public.
– DCL managed its portfolio of derivatives in a manner that violated regulatory provisions.
– DCL omitted or lied about important information concerning the acquisition of a portfolio of bonds and speculative holdings.
– DCL overvalued a portfolio of investments by an estimated €2 billion ($2.7 billion).
– DCL’s CEO understated transaction volumes.
And this gem:
From 2007 to 2008, financial communications of Dexia Crédit Local were evasive about the rising risks, though the CEO and other administrators knew about them. They covered the infractions and the consequent liquidity risks with silence.
The regulators also accused DCL’s audit firms, Deloitte and Mazars, of closing their eyes.
The report was sent to DCL, along with a threat that the bank would be put “under special supervision.” And then the hatchet was buried for some reason. It remains to be seen if the wrongdoing at the bank will ever lead to legal actions against the perpetrators.
And just how deceitful can bank management get? The Financial Times added another wrinkle: a false recapitalization! Dexia lent €1.5 billion to its two largest institutional shareholders before 2008, so that they would invest it in Dexia common stock. As a result, Dexia showed a capital increase of €1.5 billion. Inexplicably, the practice wasn’t illegal at the time, though Belgian regulators noticed it.
After all this, we welcome comforting words.
“Belgian banks don’t need to be recapitalized, according to the EBA,” said YvesLeterme, the caretaker prime minister of the country that is still without government. The EBA, of course, is the European Banking Authority, the very same entity whose “stress test” Dexia had passed in July with flying colors.