Franco-Belgian bank Dexia agreed early on Monday to the nationalisation of its Belgian banking division and secured state guarantees in a rescue that could pressure other euro zone governments to strengthen their banking sectors.

Belgium will pay 4 billion euros ($5.4 billion) to buy Dexia Bank Belgium, the largely retail Belgian division, which has 6,000 staff and deposits totaling 80 billion euros from 4 million customers.

Dexia also secured state guarantees of up to 90 billion euros to secure borrowing over the next 10 years. Belgium would provide 60.5 percent of these guarantees, France 36.5 percent and Luxembourg 3 percent.

Dexia's announcement came after a board meeting that lasted some 14 hours from mid-afternoon on Sunday after France, Belgium and Luxembourg had agreed on a rescue plan.

The extraordinary meetings at the end of the weekend had echoes of the dismantlement of financial group Fortis in October 2008 by the Netherlands, Belgium and BNP Paribas. Then, shareholders protested at the initial terms offered, and only agreed on improved terms six months later.

The governments rushed to support Dexia after it became the first bank to fall victim to the two-year-old euro zone debt crisis, as a credit crunch denied it access to wholesale funds and sent its shares down 42 percent last week.

"We found an agreement on the fair division of the costs related to the management of the 'rest bank'," Belgian Prime Minister Yves Leterme told a news conference in the early hours of Monday.

The likely burden of bailing out Dexia led ratings agency Moody's to warn Belgium late on Friday that its Aa1 government bond ratings may fall.

The country had a debt-to-GDP ratio of 96.2 percent last year, lower only than Greece and Italy among euro zone members and on a par with bailout recipient Ireland.

Finance Minister Didier Reynders said that the deal should not push Belgium's debt-to-GDP ratio above 100 percent.

Dexia, which used short-term funding to finance long-term lending, found credit drying up as the euro zone debt crisis worsened. The problem was exacerbated by the bank's heavy exposure to Greece.

Dexia has global credit risk exposure of $700 billion - more than twice Greece's GDP - and its rescue has stoked investors' anxieties about the strength of European banks in general.

The governments' rescue package came as the leaders of France and Germany agreed that European banks needed to be recapitalised, but papered over differences on how that would happen.

Paris wants to tap the euro zone's 440 billion euro ($594 billion) European Financial Stability Facility (EFSF) to recapitalise French banks, while Berlin is insisting the fund should be used as a last resort.

There were fresh reports over the weekend that big French banks BNP Paribas and Societe Generale might agree to capital injections as part of a Europe-wide plan to boost lenders' financial strength. However, both banks deny such plans.

Dexia's board had also instructed the company's chief executive to seek backing from French state bank Caisse des Depots. A consortium of CDC and La Banque Postale, the French post office's banking arm, would ensure the financing of public entities in France.

It was not clear what would be the fate of healthy businesses, such as Denizbank in Turkey, its asset management operation and its funds custody joint venture with Royal Bank of Canada.

Its Luxembourg division is set to be sold.

Otherwise, Dexia will be left with a portfolio of bonds in run-off, which totalled 95.3 billion euros at the end of June and including 7.7 billion euros of junk class and some 7.4 billion euros of mortgage-backed securities.

Dexia's shares have been suspended since Thursday afternoon. Belgium's financial markets watchdog said trading would resume on Monday after the bank's news conference and analyst call.

Chairman Jean-Luc Dehaene and Chief Executive Pierre Mariani were scheduled to host a news conference at 0900 Central European Time (0700 GMT). ($1 = 0.741 Euros) – Reuters