It will take until 2099 to liquidate toxic assets at Dexia, the head of the ailing bank said on Thursday hours after it was bailed out again by France and Belgium, and reported a huge third-quarter loss.
Administrator Karel De Boeck told a news conference that totally dismantling the bank, a process that began in October 2011, would last almost another century due to its holdings of toxic assets.
Although the troubled bank has shed all of its subsidiaries, in September it remained saddled with a soured portfolio of bonds worth 69 billion euros which worse still had been bought on credit.
A forced sale of part or all of the assets before maturity would trigger "enormous" losses, he warned.
"A total and immediate liquidation of Dexia is not possible. It would cost a mad amount of money," De Boeck said. "We think it would be better not to deleverage and not to take losses because these losses can be avoided," he said.
In Paris, the bank reported a third-quarter net loss of 1.2 billion euros ($1.53 billion) on Thursday, blaming the cost of asset sales and financing state guarantees.
It said asset sales had generated big capital losses and left Dexia SA with negative shareholder funds, meaning its capital was all used up.
Overnight, the French and Belgian governments agreed to support the bank with new capital of 5.5 billion euros. This deal must be approved by the shareholders, probably just before Christmas.
The two governments also agreed to change the way providing state guarantees to the bank is shared out but this is subject to approval by European Union competition authorities.
De Boeck said he hoped for a response from the Commission at the end of January.
The deal also calls for a cut in the limit on state loan guarantees to 85 billion euros from 90 billion euros.
After what sources close to the matter described as "difficult" talks between Paris and Brussels, Belgium's share of the restructuring burden was reduced from 60.5 percent to 51.4 percent.
The lower rate means Belgium's liabilities are in effect cut by nearly 11 billion euros.
Belgium however had sought a 50:50 split while France wanted Brussels to still take the lion's share of the costs at 55 percent, according to the Belgian press.
"The agreement is in our interest and is balanced," said Belgian Finance Minister Steven Vanackere, adding that the previous 60.5 percent commitment on 90 billion euros "impacted on the way we were looked at" by the markets.
The overnight agreement was reached by Vanackere and his French counterpart Pierre Moscovici and has already been given the green light by key ministers in the Belgian cabinet, a statement from Brussels said.
Paris and Brussels were keen to find an accord before Dexia issued its quarterly results early on Thursday.
Dexia bank operated a retail business in Belgium but its core business was financing public bodies and local authorities in France and Belgium.
It has been mired in crippling financial problems since the beginning of the financial crisis four years ago.
Shareholders France, Belgium and Luxembourg began breaking up Dexia in late 2011 after the bank sought a second bailout to keep it afloat as the global financial crisis morphed into the European debt crisis.
In the third quarter, the bank was hit by a capital loss of 599 million euros on the sale of its Turkish unit DenizBank with costs incurred too on other disposals.