Exhibit 10.12

                              EMPLOYMENT AGREEMENT

            AGREEMENT, dated as of March 14, 2000 by and between Financial
Security Assurance Holdings Ltd., a New York corporation ("Company"), and Sean
W. McCarthy ("Employee").

            WHEREAS, Dexia S.A. ("Dexia") and Company are entering into an
Agreement and Plan of Merger dated as of March 14, 2000 (the "Merger
Agreement"), whereby Company will become a wholly-owned subsidiary of Dexia; and

            WHEREAS, Company desires to employ Employee and Employee is willing
to serve as an employee of Company, subject to the terms and conditions of this
Agreement;

            NOW, THEREFORE, IN CONSIDERATION OF the mutual covenants herein
contained, and other good and valuable consideration, the parties hereto agree
as follows:

            1. Employment.

            Company hereby employs Employee, and Employee agrees to serve as an
employee of Company, on the terms and conditions set forth in this Agreement.

            2. Term.

            Employee's employment shall commence at the Effective Time (as
defined in the Merger Agreement) and end on the fourth anniversary of the
Effective Time (the "Term").

            3. Duties During Employment.

            During Employee's employment with Company, Employee shall serve as
Managing Director and Chief Operating Officer of Company and shall have such
duties and responsibilities as are assigned to him by the Board of Directors of
Company (the "Board") and as are consistent with the magnitude and scope of his
duties and responsibilities as of the Effective Time. The Employee shall report
directly to the Chairman and Chief Executive Officer of Company.
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            Employee shall devote Employee's full business time and attention
and best efforts to the affairs of Company during his period of employment,
provided, however, that Employee may continue to engage in other activities,
such as activities involving professional, charitable, educational, religious
and similar types of organizations, speaking engagements, membership on the
board of directors of such other organizations, provided that such activities do
not interfere with the performance of his duties for Company.

            4. Current Cash Compensation.

            (1) Base Salary.

            As compensation for his services hereunder, Company will pay to
Employee during the period of his employment a base salary at the annual rate in
effect immediately prior to the Effective Time, payable in accordance with
Company's payroll practices for senior executives. Company shall review the base
salary bi-annually (with the next review to take place January 2001) and in
light of such review may, in the discretion of the Board (but shall not be
obligated to), increase such base salary taking into account any change in
Employee's then responsibilities, performance by Employee, and other pertinent
factors.

            (2) Annual Bonus. Company shall maintain a bonus pool (the "Bonus
Pool") for the benefit of Company employees equal to seven percent (7%) of the
after-tax growth in adjusted book value, excluding realized and unrealized
gains/losses on investments and including a return on equity ("ROE") modifier
that is consistent with the Company's practice as of the date hereof. The
Company shall also maintain a reserve bonus pool (the "Reserve Pool") made up of
previously earned but undistributed Bonus Pool allocations from prior years,
equal to approximately $7 million, which shall be distributable at the
discretion of the management of the Company in consultation with Dexia. Employee
shall receive an annual cash bonus equal to at least 4.25% of each of the Bonus
Pool and the Reserve Pool, if applicable. An additional 2.9% of the Bonus Pool
and Reserve Pool, if applicable, shall be allocated among Employee, Mr. Robert
P. Cochran and Mr. Roger K. Taylor as determined by Company's Human Resources


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Committee; provided, however, that such percentage shall be reduced to (i) 1.75%
in the event Mr. Cochran is no longer employed by the Company and (ii) 2.02% in
the event either Employee or Mr. Taylor is no longer employed by Company. It
should be noted that the above described percentages are minimum percentages and
that it is anticipated that the actual percentages of each of the Bonus Pool and
Reserve Pool to be allocated among Employee, Mr. Cochran and Mr. Taylor will be
in the range of 17% to 20%, based on each employee's individual performance and
the performance of Company.

            (3) Performance Shares. In each calendar year in the Term, beginning
in 2001, Employee shall receive an annual Performance Share grant under the
Company's 1993 Equity Participation Plan (the "Performance Share Plan"), as
presently in effect or as may be modified or added to by Company from time to
time, equal to no less than 50% of such Employee's 2000 Performance Share grant.
Such awards shall comply with the terms of the compensation program included in
the post-transaction compensation program prepared by Johnson Associates, Inc.
included in the Merger Agreement, except as provided herein. Except as provided
herein, such Performance Shares shall vest according to the terms of the
Performance Share Plan.

            5. Other Employee Benefits. In addition to the cash compensation
provided for in Section 4 hereof, Employee, subject to meeting eligibility
provisions thereof, shall be entitled to participate in Company's employee
benefit plans, as presently in effect or as they may be modified or added to by
Company from time to time to the same extent as are otherwise enjoyed by the
senior executives of Company, which shall not be reduced in any material respect
from plans in existence as of the Effective Time.

            6. Termination.

            (1) Termination by Company Without Cause;
                Termination by Employee for Good Reason.

                  (i) During the Term. If, during the Term, Company should
      terminate Employee's employment without Cause (as defined below), or if
      Employee should terminate his employment for Good Reason (as defined
      below), Company shall pay to Employee an amount equal to two times the sum
      of (A)


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      Employee's annual base salary at the rate in effect immediately prior to
      the date of termination and (B) the average annual bonus payable to
      Employee for the two (2) years immediately prior to the year during which
      termination occurred (the "Severance Payment"). The Severance Payment,
      which shall be in lieu of any amount payable to Employee under the
      Company's Severance Policy for Senior Management, shall be payable in
      monthly installments over the Restricted Period (as defined in Section
      7(b) below). Notwithstanding any provision of the Performance Share Plan
      to the contrary, in the event the Employee's employment is terminated
      pursuant to this Section 6(a)(i), (x) all Performance Shares then
      outstanding shall vest pro rata in proportion to the percentage of the
      performance cycle for such Performance Shares during which Employee was
      employed by Company, (y) Employee shall vest in two-thirds of such
      Performance Shares that are then outstanding which have not vested
      pursuant to clause (x), and (z) Employee shall be deemed to have been
      awarded and to have vested in two-thirds of the minimum annual Performance
      Share grant(s) provided for in Section 4(c) to which he is otherwise
      entitled and for which a Performance Share grant has not otherwise been
      made. Employee shall receive a cash payment with respect to all such
      Performance Shares valued pursuant to the valuation mechanism provided in
      the Performance Share Plan (which provides a mechanism for determining the
      number of Performance Shares and the price per share) as applicable to
      Performance Shares outstanding at the Effective Time and Performance
      Shares granted subsequent to the Effective Time, respectively. If the
      performance cycle includes at least one completed year, the payout for
      each such completed year shall be based on the actual results for the
      completed year(s) and 100% will be used for uncompleted years; or if the
      performance cycle does not include any completed years, 100% payout. The
      value which is obtained by multiplying the number of Performance Shares
      determined under (x), (y) and (z) above by, the applicable share price
      determined under the valuation mechanism in the Performance Share Plan at
      the time of the termination will be increased with


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      interest at 8% per year, compounded semi-annually, from the date of
      termination to the date of payment. Such cash payment shall be made within
      five (5) days after the end of the Restricted Period (as defined in
      Section 7(b)). Such cash payment shall be forfeited in the event Employee
      breaches his obligations under Section 7(b) and (c) of this Agreement.

                  (ii) After the Term. If, at any time after the Term, Company
      should terminate Employee's employment without Cause, or if Employee
      should terminate his employment for Good Reason, Company shall pay to
      Employee the Severance Payment, which shall be in lieu of any amount
      payable to Employee under the Company's Severance Policy for Senior
      Management, payable in a lump sum within five (5) days of termination.
      Notwithstanding any provision of the Performance Share Plan to the
      contrary, in the event Employee's employment is terminated pursuant to
      this Section 6(a)(ii), (A) all Performance Shares granted during the Term
      shall vest pro rata in proportion to the percentage of the performance
      cycle for such Performance Shares during which Employee was employed by
      Company and (B) Employee shall vest in two-thirds of the Performance
      Shares granted during the Term which have not vested pursuant to clause
      (A). All Performance Shares granted after the Term shall be treated
      according to the terms of the Performance Share Plan as then in effect.
      Within five (5) days of a termination pursuant to this Section 6(a)(ii),
      Employee shall receive a lump sum cash payment with respect to all such
      Performance Shares at a value of such shares multiplied by the applicable
      share price determined under the valuation mechanism in the Performance
      Share Plan.

            "Cause" shall mean (i) conviction or plea of nolo contendere (or
similar plea) in a criminal proceeding for commission of a misdemeanor or a
felony that is materially injurious to the Company; (ii) willful and continued
failure by Employee to perform substantially his duties with Company (other than
any such failure resulting from incapacity due to physical or mental illness)
after a demand for substantial performance is delivered to Employee by Company
which specifically identifies the manner in which


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Company believes Employee has not substantially performed his duties; or (iii)
Employee engages in willful misconduct in carrying out his duties with Company
which is directly and materially harmful to the business or reputation of
Company. Employee shall not be terminated for Cause unless he is provided with
notice stating in reasonable detail the alleged misconduct and if such
misconduct is reasonably susceptible to cure, he is allowed a period of time
(not less than ten (10) days) to cure the misconduct; and a resolution is
adopted by the Board at a scheduled meeting at which Employee shall be entitled
to attend and speak to the Board.

            "Good Reason" shall mean, without Cause: (i) a diminution of any of
Employee's significant duties or responsibilities; (ii) breach by the Company of
its obligations hereunder; (iii) Company's requiring Employee to be based at an
office that is greater than twenty-five (25) miles from the location of
Employee's office as of the Effective Time; or (iv) after the Term and prior to
January 1, 2008, a material adverse change in Employee's total compensation as
in effect at the Effective Time. Notwithstanding the foregoing, Employee shall
not be deemed to have terminated his employment for Good Reason unless he gives
60 days' prior written notice to Company stating in reasonable detail the basis
upon which "Good Reason" is asserted, such notice is given within 120 days of
the later of the occurrence of the event or the date Employee knows or should
have known of the event which would otherwise constitute Good Reason and, if
such failure or breach is reasonably susceptible to cure, Company does not
effect a cure within such 60-day period.

            (2) Termination by Company for Cause;
                Termination by Employee without Good Reason.

                  (i) During the Term. If, during the Term, Company should
      terminate Employee's employment for Cause or Employee should terminate his
      employment without Good Reason, Employee will be entitled only to be paid
      the pro-rata annual base salary otherwise payable to Employee under
      paragraph (a) of Section 4 through the date of termination. All
      Performance Shares that are unvested on the date of termination shall be
      forfeited.


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                  (ii) After the Term. If, after the Term, Company should
      terminate Employee's employment for Cause or Employee should terminate his
      employment without Good Reason, Employee will be entitled to be paid the
      pro-rata annual base salary otherwise payable to Employee under paragraph
      (a) of Section 4 through the date of termination and a pro-rata annual
      bonus through the date of termination. Notwithstanding any provision of
      the Performance Share Plan to the contrary, in the event Employee's
      employment is terminated pursuant to this Section 6(b)(ii), all
      outstanding Performance Shares granted during the Term shall vest pro rata
      in proportion to the percentage of the performance cycle for such
      Performance Shares during which Employee was employed by Company. All
      Performance Shares granted after the Term shall be treated according to
      the terms of the Performance Share Plan then in effect. Within five (5)
      days of a termination pursuant to this Section 6(b)(ii), Employee shall
      receive a lump sum cash payment with respect to all such Performance
      Shares at a value of such shares multiplied by the applicable share price
      determined under the valuation mechanism in the Performance Share Plan.

            (c) Additional Payments. If applicable, Employee shall be eligible
to receive the additional payments set forth on Annex A.

            (d) No Disparaging Statements.

            In the event of termination of Employee's employment for any reason
by Company or Employee, Employee will not at any time publicly denigrate,
ridicule or intentionally criticize Company or any of its affiliates including,
without limitation, by way of news interviews, or the expression of personal
views, opinions or judgments to the news media. Similarly, neither Company nor
any of its affiliates will publicly denigrate, ridicule or intentionally
criticize Employee.

            7. Restrictive Covenants.

            (1) Confidential Information.

            Employee agrees to keep secret and retain in the strictest
confidence all confidential matters which relate to Company or any affiliate of
Company, including,


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without limitation, customer lists, client lists, trade secrets, pricing
policies and other nonpublic business affairs of Company and any affiliate of
Company learned by him from Company or any such affiliate or otherwise before or
after the date of this Agreement, and not to disclose any such confidential
matter to anyone outside Company or any of its affiliates, whether during or
after his period of service with Company, except as may be required by a court
of law, by any governmental agency having supervisory authority over the
business of Company or by any administrative or legislative body (including a
committee thereof) with apparent jurisdiction to order him to divulge, disclose
or make accessible such information. Employee agrees to give Company advance
written notice of any disclosure pursuant to the preceding sentence and to
cooperate at the Company's expense with any efforts by Company to limit the
extent of such disclosure. Upon request by Company, Employee agrees to deliver
promptly to Company upon termination of his services for Company, or at any time
thereafter as Company may request, all Company or affiliate memoranda, notes,
records, reports, manuals, drawings, designs, computer files in any media and
other documents (and all copies thereof) relating to Company's or any
affiliate's business and all property of Company or any affiliate associated
therewith, which he may then possess or have under his control, other than
personal notes, diaries, rolodexes and correspondence.

            (2) Covenant Not to Compete.

            During the term of this Agreement and for the remainder of the Term,
upon a termination of Employee's employment for any reason (the "Restricted
Period"), Employee shall not directly or indirectly, own, manage, operate, join,
control, or participate in the ownership, management, operation or control of,
or be employed by or connected in any manner with, any competing business,
whether for compensation or otherwise, without the prior written consent of
Company (excluding less than 5% stakes in public vehicles). For the purposes of
this Agreement, a "competing business" shall be any financial services business
which is a significant competitor of Company or its affiliates. Should Employee,
directly or indirectly, own, manage, operate, join, control or participate in
the ownership, management, operation or control of, or be employed by or


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connected in any manner with, any competing business, all payments under this
Agreement shall cease.

            (3) Covenant Not to Solicit Company Clients or Employees.

            During the term of this Agreement, and for the Restricted Period,
Employee shall not, in any manner, directly or indirectly, (i) raid or solicit
any client or prospective client of Company or its affiliates to whom Employee
provided services, or for whom Employee transacted business, or whose identity
became known to Employee in connection with Employee's employment with Company,
to transact business with a competing business or reduce or refrain from doing
any business with Company or its affiliates or (ii) interfere with or damage (or
attempt to interfere with or damage) any relationship between Company or its
affiliates and any such client or prospective client. During the term of this
Agreement, and for the Restricted Period, Employee further agrees that Employee
shall not, in any manner, directly or indirectly, solicit any person who is an
employee of Company or its affiliates to apply for or accept employment with any
competing business. The term "solicit" as used in this Agreement means any
communication of any kind whatsoever, regardless of by whom initiated, inviting,
encouraging or requesting any person or entity to take or refrain from taking
any action.

            (4) Employee agrees that during his employment and thereafter
Employee shall be available to Company and Parent and shall assist Company and
Parent in connection with any litigation brought by or against Company or its
affiliates and Parent relating to the period during which Employee was employed
by Company; provided, however, that all costs and expenses in connection with
the foregoing shall be borne by Company and/or Parent and advanced to the
Employee.

            (5) The provisions of this Section 7 shall survive the termination
or expiration of this Agreement in accordance with the terms hereof. It is the
intention of the parties hereto that the restrictions contained in this Section
7 be enforceable to the fullest extent permitted by law. Therefore, to the
extent any court of competent jurisdiction shall determine that any portion of
the foregoing restrictions is excessive,


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such provision shall not be entirely void, but rather shall be limited or
revised only to the extent necessary to make it enforceable.

            8. Remedy.

            Should Employee engage in or perform, either directly or indirectly,
any of the acts prohibited by Section 7 hereof, it is agreed that Company shall
be entitled to full injunctive relief, to be issued by any competent court of
equity, enjoining and restraining Employee and each and every other person,
firm, organization, association, or corporation concerned therein, from the
continuance of such violative acts. The foregoing remedy available to Company
shall not be deemed to limit or prevent the exercise by Company of any or all
further rights and remedies which may be available to Company hereunder or at
law or in equity.

            9. Prior Notice to Prospective Employer.

            Prior to accepting employment with any other person or entity during
Employee's employment or the Restricted Period, Employee shall provide such
prospective employer with written notice of the provisions of this Agreement.

            10. Arbitration.

            If a dispute arises between the parties respecting the terms of this
Agreement or Employee's employment by Company, such dispute shall be settled
only by binding arbitration in New York, New York, in accordance with the
commercial arbitration rules of the American Arbitration Association. Company
will pay the costs of arbitration and reasonable legal fees, provided that the
claim is determined not to be frivolous.

            11. Directors' and Officers' Insurance.

            During the Employee's employment, Company shall maintain directors'
and officers' liability insurance covering Employee, which contains at least the
same coverage and amounts and contains terms and conditions no less advantageous
than that coverage provided by Company as of the Effective Time.


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            12. Governing Law.

            This Agreement is governed by and is to be construed and enforced in
accordance with the laws of the State of New York, without reference to
principles relating to conflict of laws. If under such law, any portion of this
Agreement is at any time deemed to be in conflict with any applicable statute,
rule, regulation or ordinance, such portion shall be deemed to be modified or
altered to conform thereto or, if that is not possible, to be omitted from this
Agreement; the invalidity of any such portion shall not affect the force, effect
and validity of the remaining portion hereof.

            13. Notices.

            All notices under this Agreement shall be in writing and shall be
deemed effective when delivered in person, or five (5) days after deposit
thereof in the U.S. mails, postage prepaid, for delivery as registered or
certified mail, addressed to the respective party at the address set forth below
or to such other address as may hereafter be designated by like notice. Unless
otherwise notified as set forth above, notice shall be sent to each party as
follows:

            (1) Employee, to:
                Sean W. McCarthy
                1160 Park Avenue, Apt. 7A
                New York, New York  10128

            (2) Company, to:
                7 a quai Andre Citroen BP-1002
                75 901 Paris Cedex 15
                Attention: Jean-Paul Gauzes

            In lieu of personal notice or notice by deposit in the U.S. mail, a
party may give notice by confirmed telegram, telex or fax, which shall be
effective upon receipt.

            14. Entire Agreement.

            This Agreement constitutes the entire understanding between Company
and Employee relating to the terms of employment of Employee by Company and
supersedes and cancels all prior written and oral agreements and understandings
with


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respect to the subject matter of this Agreement. This Agreement may be amended
but only by a subsequent written agreement of the parties. This Agreement shall
be binding upon and shall inure to the benefit of Employee, Employee's heirs,
executors, administrators and beneficiaries, and Company and its successors.

            15. Successors.

            This Agreement is personal to Employee and without the prior written
consent of Company shall not be assignable by Employee otherwise than by will or
the laws of descent and distribution. This Agreement shall inure to the benefit
of and be enforceable by Employee's legal representatives. This Agreement shall
inure to the benefit of and be binding upon Company and its successors and
assigns.

            16. Withholding Taxes.

            All amounts payable to Employee under this Agreement shall be
subject to applicable withholding of income, wage and other taxes.

            17. Waiver of Breach.

            The waiver by either party of a breach of any term of this Agreement
shall not operate nor be construed as a waiver of any subsequent breach thereof.
Any waiver must be in writing and signed by the Executive or an authorized
officer of the Company, as the case may be.

            18. Survivorship.

            The respective rights and obligations of the parties hereunder shall
survive any termination of the Executive's employment to the extent necessary to
the intended preservation of such rights and obligations.

            19. Severability.

            If any one or more of the provisions contained in this Agreement
shall be invalid, illegal or unenforceable in any respect under any applicable
law, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby.


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            20. Headings.

            The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.

            21. Counterparts.

            This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.

            IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the year and day first above written.

                              Financial Security Assurance Holdings Ltd.


                              By:           /s/ Bruce Stern
                                 --------------------------------------
                                    Managing Director/General Counsel


                                          /s/ Sean W. McCarthy
                              -----------------------------------------
                                            Sean W. McCarthy


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                                                                         ANNEX A

                               Additional Payments

            (a) Except as set forth below, in the event it shall be determined
that any payment or distribution by Company to or for the benefit of Employee
(whether paid or payable or distributed or distributable pursuant to the terms
of the Agreement or otherwise, but determined without regard to any additional
payments required under this Annex A) (a "Payment") would be subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code") or any interest or penalties are incurred by Employee with
respect to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"), then
Employee shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by Employee of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
Employee retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.

            (b) Subject to the provisions of paragraph (c), all determinations
required to be made under this Annex A, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by Company's
independent auditors or such other certified public accounting firm reasonably
acceptable to Employee as may be designated by Company (the "Accounting Firm")
which shall provide detailed supporting calculations both to Company and
Employee within 15 business days of the receipt of notice from Employee that
there has been a Payment, or such earlier time as is requested by Company. All
fees and expenses of the Accounting Firm shall be borne solely by Company. Any
Gross-Up Payment, as determined pursuant to this Annex A, shall be paid by
Company to Employee not later than the due date for the payment of any Excise
Tax. Any determination by the Accounting Firm shall be binding upon Company and
Employee. As a result of the uncertainty in the application of Section 4999 of
the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by Company should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that Company exhausts
its remedies pursuant to paragraph (c) and Employee thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall determine the amount
of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by Company to or for the benefit of Employee. In the event the
amount of the Gross-up Payment exceeds the amount
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necessary to reimburse Employee for the Excise Tax (the "Overpayment"), the
Accounting Firm shall determine the amount of the Overpayment that has been made
and any such Overpayment shall be promptly paid by Employee (to the extent
Employee has received a refund if the applicable Excise Tax has been paid to the
Internal Revenue Service) to or for the benefit of the Company. Employee shall
cooperate, to the extent expenses are reimbursed by the Company, with any
reasonable requests by the Company in connection with any contests or disputes
with the Internal Revenue Service in connection with the Excise Tax.