Failed Franco-Belgian banking group Dexia may need soon need an injection of fresh capital if market conditions don't improve, Belgian's central bank governor Luc Coene said Friday.
"If market conditions don't allow Dexia to reduce its losses, it will definitely need to be recapitalised, and soon" Coene told the Belgian daily L'Echo in an interview to be published on Saturday.
The bank suffered a 1.2-billion-euro ($1.5-billion) loss in the first half of 2012, linked mainly to interest payments on state bailouts from France, Belgium and Luxembourg.
"Everything depends on the market conditions we have in the third and fourth quarter," added Coene, who also sits on the European Central Bank's policy-setting Governing Council.
"If the current market conditions persist, I believe there is a risk that this recapitalisation should take place in the short term rather than in the long term."
First bailed out in 2008 amid the global financial crisis, Dexia was not able to survive subsequent turmoil created by the eurozone debt crisis and in October last year the three eurozone countries stepped in to wind up the bank.
It has 55 billion euros in guarantees from the three nations, which may rise to 90 billion, but these guarantees only kick in if the bank cannot repay financing.
Coene said the losses would force Dexia to burn up its capital.
Dexia's Luxembourg unit was sold off in April to the Qatari investment group Precision Capital for 730 million euros, and it has also sold off its Turkish unit Denizbank.
Talks are still underway on selling its asset management business as well as reorganising its French operation that finances local governments.