EU opens probe into sale of Dexia bank unit in Luxembourg

(PARIS) - The European Commission has launched an in-depth investigation into the sale of the Luxembourg unit of fallen Franco-Belgian bank Dexia to an investor linked to the Qatari royal family, the EU said on Tuesday.

The Commission said the probe focused on whether the sale of Dexia BIL "is conducted on market conditions and therefore does not contain any state aid element."

Following the dismantling of Dexia, investors linked to Qatar's royal family agreed to buy 90 percent of Dexia BIL, the bank's Luxembourg unit.

The transaction, mostly for Dexia BIL's retail and private banking businesses, also involves the state of Luxembourg acquiring 10 percent for 100 million euros.

"Given that the proposed sale is the result of exclusive negotiations with one private investor ... the Commission has opened an in-depth investigation to assess whether the price of the transaction" is in line with its market valuation, it said in a statement.

The Commission added it "does not have enough information on the valuation of the carved-out businesses at this stage".

The Commission said an in-depth investigation gives interested third parties the possibility to submit comments on the sale and increases legal certainty.

First bailed out in 2008 at the height of the global financial crisis, Dexia could not cope with the turmoil of the eurozone debt quagmire and in October, France, Belgium and Luxembourg stepped in to wind up the bank.

In December, the European Commission gave the governments three months to come up with a restructuring plan, or a liquidation plan if Dexia does not prove to be viable.

The Commission gave temporary approval to guarantees worth "a maximum capital value of 45 billion euros ($60 billion)," 60.5 percent of which comes from Belgium, 36.5 percent from France and 3.0 percent from Luxembourg.

The three countries initially wanted 90 million euros in guarantees.

The EU's competition watchdog said that "the guarantee mechanism is necessary in order to preserve the financial stability of the member states concerned, given the systemic importance of Dexia SA."

However, it also expressed "doubts at this stage as to whether the temporary guarantee measure is compatible with the single market," and said it.

The Commission also announced an in-depth investigation of a move by Belgium to extend its deposit guarantee scheme to shareholders in financial cooperatives.

A Belgium cooperative, ARCO, which owned a 14 percent stake in Dexia is also in the process of being liquidated, asked for inclusion in the guarantee scheme.

The Commission said it would investigate whether the inclusion in the guarantee scheme gave financial cooperatives an advantage in attracting and retaining capital that amounted to illegal state aid under EU rules