Fitch said the move reflected “the deteriorating operating environment on Dexia’s structural weaknesses, which mainly relate to funding and liquidity.” The ratings agency noted that Dexia held €3.8 billion of Greek government bonds at the end of July. While the banking group has already written down 21 percent of the bonds’ value, Fitch warned that further hits to its Greek debt holdings may be forthcoming.
However, Fitch analysts re-affirmed A+ long term debt ratings for its Dexia Credit Local, Dexia Bank Belgium and Dexia Banque Internationale à Luxembourg subsidiaries. The agency said those operations were a safer bet because “given Dexia’s public ownership and systemic importance, there is an extremely high probability that support from the states of Belgium, France and Luxembourg would be forthcoming, if needed.”
Fitch ratings run from AAA at the highest to D at the lowest end of the scale.
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