PARIS: Crisis-hit Franco-Belgian bank Dexia announced on Wednesday it would cancel the sale of its asset management division, Dexia AM, to Hong Kong's GCS Capital.
The divestment was a crucial part of winding up Dexia, a painful exercise that has so far cost the French state 6.6 billion euros ($8.6 billion), according to figures from the French public auditor last week.
France and Belgium were forced to rescue the bank, a major lender to local governments, after the global financial crisis left it over-extended and unable to raise funding due to risky investments that had turned sour.
The sale of Dexia AM agreed in December for 380 million euros was due to be completed by the end of June and the deadline had been extended, but Dexia said it was now calling it off.
At the end of 2011, Dexia AM had 78 billion euros under management.
In its report last week, France's auditor said there was a "more than negligeable" risk that Dexia would need more state-backed recapitalisation.
The costs have driven up public deficits in both France and Belgium, both of which are struggling to meet EU-mandated budgeting rules.
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