Dexia became the world's top municipal lender, then needed a second bailout

Dexia Group was created in 1996 from the merger of French and Belgian public-sector lenders and grew into the world's largest municipal lender. It expanded aggressively into US housing-related assets and long-term public-finance lending, funding itself with short-term wholesale borrowing.

In 2008, losses on US mortgage exposure and depositor runs forced Belgium, France and Luxembourg to inject €6 billion of capital. The European Commission approved a restructuring plan in 2010 that was supposed to shrink risk and refocus on home markets. Instead, Dexia remained heavily exposed to eurozone sovereign debt and interest-rate derivatives.

When the eurozone crisis intensified in 2011, Dexia lost access to wholesale funding and posted an €11.6 billion net loss. On 10 October 2011 the group was dismantled: Belgium nationalised Dexia Bank Belgium for €4 billion, the French municipal-lending arm was sold to French public-sector banks, and the remaining toxic assets were placed in a bad bank backed by up to €90 billion in state guarantees.