The board of directors of Franco-Belgian bank Dexia SA yesterday reaffirmed its earlier mandate that chief executive officer Pierre Mariani should explore all options for reducing risk associated with bond insurer subsidiary Financial Security Assurance Inc. in response to rumors the company planned to sell all or parts of the insurer.

Dexia said in a statement that it will report on any decision about FSA "in due time." Dexia reports its third-quarter results on Nov. 14, when Mariani is supposed to also present a strategic plan for the bank.

FSA's exposures to the deteriorating U.S. housing market have hit Dexia's bottom line. Although FSA avoided exposures to the structured finance collateralized-debt obligations that have led to billions in losses at other bond insurers, it still has exposure to residential mortgage-backed securities.

Dexia has already extended a $5 billion unsecured line of credit to help FSA's financial products unit. It has also said it will contribute no more than $500 million in capital to the financial products unit to cover any economic losses beyond the $316 million recognized as of June 30. FSA in August said it would exit the structured finance business to focus on public finance.

The governments of France, Belgium, and Luxembourg in October took a number of measures to help prop up Dexia, including working with institutional investors in a multibillion-dollar capital injection. At that time, many suggested splitting up Dexia, but Mariani said it would be difficult to isolate FSA.

Dexia shares jumped last week when rumors of a sale of FSA surfaced. A Belgian business newspaper, De Tijd, yesterday reported that Warren Buffett's Berkshire Hathaway Assurance Corp. and Assured Guaranty Ltd. - of which billionaire Wilbur Ross' W.L. Ross & Co. is a major shareholder - were interested in buying at least parts of FSA.

Berkshire did not return calls seeking comment, and Assured declined to comment. A spokesman for FSA said the company does not comment on market rumors.

FSA picked up business following the downgrades to other financial guarantors, and it ranked as the market's top bond insurer through October, wrapping 1,354 deals with a par value of $38.5 billion, according to Thomson Reuters. But business has slowed since Moody's Investors Service in July put FSA's triple-A rating on review for downgrade. In October, FSA ranked third by par value, wrapping 27 deals with a par value of $235 million.

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