US Residential Sub Prime Mortgages

  • Dexia's exposure in this class of assets, either directly or through FSA, is very well protected , and would not cause any losses, even in case of further market deterioration.
  • Current market conditions provide opportunities for new attractive business.

In order to address the questions of the investment community on this subject, both from an industry viewpoint and as a direct player in this field, Dexia holds today a conference with analysts to review the situation in this market and give details about the exposure of its various units that are active on this class of assets.

A presentation is available on Dexia's and FSA's websites, respectively www. and, under the caption:

" Sub Prime US Residential Mortgages - Analysis and overview of Dexia Group's exposure"

Pursuant to the analysis made by Robert Cochran, CEO of Dexia's subsidiary FSA, Jacques Guerber, Vice Chairman of Dexia's Management Board, declared :

¿Strict credit disciplines along with the search for adequate returns on capital are the guiding criteria for underwriting risks and making investments. FSA and Dexia have long expected problematic developments to arise in the MBS sphere, and we have thus strongly reduced our underwritings and investments in the sub-prime mortgages asset class over the last two and a half years. The great majority of investments/underwritings which were made were with AAA rated instruments.

Having looked closely at the current direct exposures and at the protections available on each different tranche of assets, it is clear that they are not susceptible of causing any losses, even in case of further deterioration of debtors' default rates. As high as they may be, current default statistics stand very far away from those levels which would start hurting the tranches insured by FSA or held in its financial product portfolio, nor those held in Dexia's credit spread portfolio.

Current conditions seem appropriate for the Group to write new business at adequate/attractive levels of pricing so as to reward the risks and yield proper returns on capital.

Both Dexia and FSA are satisfied to have kept their powder dry in anticipation of the recent market developments¿.

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