Detroit bankruptcy could cost Dexia €100m

The bankruptcy of the city of Detroit could have important repercussions for the Dexia group, several newspapers reported on Saturday. The Belgo-French group has in its portfolio a few loans held by Detroit for an amount that could reach €100m. Dexia had invested in 2006, just before the global financial crisis, in a package of complex financial products issued by the city of Detroit to fund its pension scheme. Other European financial institutions, such as Societe Générale and Commerzbank are also affected. Dexia had at the time made provisions for a possible bankruptcy of the city, whose financial problems are not new. These provisions were calculated taking into account the intervention of the State of Michigan. But the latter may decide not to act, in which case Dexia’s provisions would be insufficient by as much as €100m.