The Franco-Belgian bank Dexia has become the first casualty of the 2011 banking crisis, with its Belgian arm being bought by the government and Belgium, France and Luxembourg providing a €90bn (£78bn) guarantee for its financing.

The bank, which specialises in local government financing and provides backing for more than 40 private finance initiative projects in the UK, ran into difficulties after its €3.4bn of exposure to Greece sparked concerns about its ability to absorb losses on the positions.

Other banks no longer wanted to lend it enough money to keep operating and it is expected to be the first of many to need bailing out during the renewed crisis in the sector. Alastair Ryan, analyst at UBS, reckoned eurozone governments could end up owning 40% of the sector if €200bn is needed to prop up banks - as estimated by the International Monetary Fund. Austrian bank Erste yesterday warned it would make a loss because of the eurozone crisis.

The embattled board of Dexia, which in 2008 received €6bn of assistance from France and Belgium, met on Sunday before it was announced on Monday that Belgium would pay €4bn for the operations in its country. Dexia shares resumed trading after last week's suspension and fell almost 5%.

Ratings agency Moody's warned on Friday that the burden of protecting Dexia could force a downgrading of the AA1 rating on Belgian government bonds. "Moody's intends to assess the potential costs and additional contingent liabilities that the government may incur in supporting the Dexia Group," the agency said. Rival Fitch also said the cost of the rescue was "not insignificant" for Belgium although finance minister Didier Reynders tried to play down the impact on the country's finances saying it would lift the country's debt from around 97% of economic output to 98%.

France was adamant that the support would not threaten its AAA rating. French finance minister François Baroin also told French televisions that other banks would not need bailouts. "No, I don't think so, certainly not French banks," he said when asked if other banks would need state handouts.

"We have one of the best standings in the world with ratings agencies and we will keep it."France is orchestrating support for the bank's operations there as two state-controlled firms - Caisse des Dépôts et Consignations and La Banque Postale - help to set up a joint venture to ensure that French local authorities financed through Dexia are able to receive the loans they need. Luxembourg is helping to take control of the operations in the duchy alongside other investors, including some from the Middle East.

France, Belgium and Luxembourg are also jointly guaranteeing interbank and bond funding raised by Dexia and its subsidiary Dexia Crédit Local for up to 10 years. The split is 60.5% Belgium, 36.5% France and 3% Luxembourg and is equal to a guarantee of €90bn for the decade.

The chief executive Pierre Mariani - who was parachuted in during the 2008 banking crisis - appeared to blame government pressure for the size of the bank's exposure to Greece and claimed credit for reducing the size of the bank's balance sheet.

"Maybe our naivety was to accept too easily the requests by governments [to keep up exposure to Greece]. We never had a problem of solvency but one of liquidity given our large portfolio of sovereign debt," Mariani said.