* On 29 September 2008 Dexia came under pressure during the crisis in the banking sector. Other banks and financial institutions refused to provide further credit to Dexia because of potential losses at its U.S. subsidiary FSA and from a multi-billion loan to troubled German bank Depfa.
The rating agency Moody’s downgraded Dexia’s long term debt and deposits ratings from Aa1 to Aa3, and downgraded the individual banks’ strengths to C- ("adequate intrinsic financial strength") with a negative outlook.
Dexia was quickly forced to apply for a bailout by the State. This support was assured within days, taking two forms:
1. a capital injection of €6.4 billion,consisting of €3 billion from the Belgian State and regional governments, €3 billion from the French State and Caisse des Dépôts et Consignations and €376 million from the government of Luxembourg.
2. a state guarantee (effective from 31 October 2008) covering Dexia’s liabilities towards credit institutions as well as bonds and other debt securities for a total maximum amount of €150 billion. Belgium provided 60.5% of the guarantee, with a 36.5% contribution from the French state and 3% from Luxembourg.
On July 15 the European Banking Authority, as part of its European bank stress tests, gave Dexia a clean bill of health, reporting that its tier 1 capital was 12.1% and would fall to 10.4% in 2012 under its "adverse scenario". This would make it one of Europe’s safest banks.
* Soon after, Dexia posted a €4 billion loss for the second quarter, the biggest in its history, after writing down the value of its Greek debt. On 4 October its shares fell 22% to €1.01 in Brussels, cutting its market value to €1.96 billion. Discussions were taking place about a possible breakup, with a plan to place its "legacy" division into a bad bank with government guarantees.
* On 10 October, it was announced that the Belgian banking arm will be purchased for €4 billion by the Belgian federal government.