Dexia SA and units Dexia Crédit Local SA, Dexia Kommunalbank Deutschland AG and Dexia Crediop SpA will be required to maintain a capital ratio of 12.125% under the ECB's Supervisory Review and Evaluation Process for 2018.
The figure comprises a Pillar 1 requirement of 8%, a Pillar 2 requirement of 2.25% and a capital conservation buffer of 1.875%. Dexia had a total capital ratio of 18.0% and Dexia Crédit Local had a 14.7% ratio as of June 30, 2017.
The ECB also said it will extend its recognition of Dexia as a bank in resolution in 2018, and thereby require it to maintain an 80% liquidity coverage ratio, compared to the 100% threshold in place for banks in Europe generally. Dexia will have to submit new projections to the ECB along with a remediation plan.
Dexia noted that its liquidity coverage ratio was above 80% in 2017.
The bank will, however, be required to deduct from common equity Tier 1 capital the economic impact that might be generated from the remediation of its failure to observe large-exposure constraints, meaning that €145 million and €185 million was deducted from the common equity Tier 1 capital of Dexia and Dexia Credit Local, respectively, as of Jan. 1, 2018.
The ECB also mandated that Dexia meet the 3% leverage ratio required of all banks; the lender noted that its and Dexia Crédit Local's leverage ratios were 4.0% and 3.2% as of June 30, 2017.
