DEXIA, THE Belgian-French bank that specialises in local authority finance, yesterday became the latest bank hit by the credit crunch to be bailed out by government funds.

It received a €6.4 billion cash injection from the Belgian, French and Luxembourg governments after its shares lost 30 per cent of their value on Monday.

It was the second time in 24 hours that the Belgian government had saved a bank, after the partial nationalisation of Fortis with the Dutch and Luxembourg governments.

The intervention caused consternation in France but Christian Noyer, governor of the French central bank, said: "The French financial system is one of the strongest in the world. There is no reason to panic."

The Belgian government and Belgian stakeholders, including three regions and three institutional shareholders, will invest €3 billion in the bank. The French government will contribute €1 billion, while the French state-controlled Caisse des Dépôts will invest €2 billion. - ( Financial Times service)